The AER today published its approval of a network tariff variation from South Australian gas distributor Australian Gas Networks (AGN).
The AER’s role is to assess AGN’s proposed changes in reference tariffs for compliance with the price controls set out in AGN’s 2016-21 access arrangement. The AER has found AGN’s proposed reference tariffs for 1 July 2018 to be compliant with this arrangement.
The AER has approved AGN’s reference tariffs, on average, changing by the rate of inflation plus an “X factor” of 3.3% and a small adjustment for unaccounted for gas. The combined effect is an increase in AGN’s reference tariffs, on average, of 4.9%.
In its 2016 decision on AGN’s 2016-21 access arrangement, the AER approved a five year access arrangement which included a large decrease in reference tariffs on 1 July 2016 (which was estimated to reduce the average residential customer’s annual gas bill by $144), followed by small increases in reference tariffs in subsequent years. In determining this arrangement, the AER sought to balance a number of considerations, including reducing the likelihood of a large “price shock” in reference tariffs at the start of the next access arrangement period.
Assuming all other factors remain constant (e.g. wholesale costs of supply and retail costs), the AER estimates 1 July 2018 reference tariffs would increase the annual retail bill of a typical residential gas customer in South Australia by $26.
The increase in 1 July 2018 reference tariffs is lower than what was initially forecast due to a decrease in the cost of borrowing and lower inflation. Notwithstanding the small increase, reference tariffs for 1 July 2018 will remain lower than they were before 2016 as a result of the AER’s decision on AGN’s 2016-21 access arrangement.