F-factor scheme results for Victorian electricity distributors 2019–20

The F-factor scheme is a Victorian Government initiative that provides financial incentives to Victorian electricity distribution businesses to minimise the number of fire starts within their networks in high fire danger zones and times.

If the number of fire starts rises, the networks are required to pay a penalty, and if it falls, distributors may receive an incentive payment.

The AER’s role is to give effect to the incentive payments/penalties by adjusting the distributors’ allowable revenue each year accordingly in accordance with the f-factor Order.

The AER received fire start reports from the distributors for the 2019–20 reporting period. These reports have been validated by Energy Safe Victoria (ESV).

The penalty or reward rates under this scheme range from around $1.48 million per fire start in high risk areas on code-red days to $300 in low risk areas on a low fire danger day. The scheme therefore provides very strong incentives in the form of rewards or penalties to networks.

For the 2019–20 reporting period, incentive payments vary from a $6,600 penalty for CitiPower with a 100 per cent urban network, to $1.5 million for Powercor with a large rural network. Overall Victorian electricity distribution businesses have received 54 per cent less in total incentive payments under the F-factor scheme in 2019–20 compared to the previous year.

Based on ESV’s validation of the reports, the AER has determined the incentive payments to the distributors for the 2019–20 period in accordance with clause 9(4) of the F-factor scheme Order 2016. These payments take the form of adjustments to the distributors’ regulated revenues for regulatory year 2022–23.