The Australian Energy Regulator (AER) today released its annual benchmarking reports for electricity distribution and transmission networks.
The benchmarking reports support the AER’s work in regulating electricity networks in the long-term interests of consumers. They are used by us, and industry, to benchmark distribution network service providers’ (DNSPs) and transmission network service providers’ (TNSPs) performance over time and against other businesses and the economy.
Key findings in these latest reports include:
- In 2022, electricity distribution and transmission industry productivity decreased slightly by 0.2% and 0.4% respectively, primarily due to a decrease in reliability (or ‘energy not served’) due to severe weather events.
- Following a long-term decline in distribution and transmission industry productivity from 2006 to 2015/16, productivity in both sectors has trended upwards, benefiting consumers by helping to put downward pressure on the network cost component of their electricity bills. This improvement is primarily due to reductions in operating expenditure and slower growth in capital asset inputs relative to earlier years.
This year’s annual benchmarking reports also set out the development work we have undertaken as part of the continuous improvement of our benchmarking tools, as well as future areas for further refinement.
To help make it easier for readers, particularly consumers, to engage with the reports we have published ‘easy to read’ Fact Sheets that summarise what benchmarking is, how we use it, and some of the key results for distribution and transmission.
Background
These reports include the results from a variety of benchmarking techniques that we use to analyse the productivity of DNSPs and TNSPs individually, and as an industry, in the National Electricity Market. We use these results to understand the drivers of trends in electricity network efficiency over time, and changes in these trends. This can help us understand why network productivity is increasing or decreasing and where best to target our expenditure reviews of network revenue proposals.
One key use of our benchmarking is to inform our assessment of the efficiency of operating expenditure in distribution network revenue resets, including the current NSW, ACT and Tasmanian resets underway. Where we find a network’s costs to be materially inefficient we may use the benchmarking to adjust its operating expenditure down to a more efficient level, reducing how much revenue the distribution network can recover from its customers through electricity bills.