The AER has published its 2024 electricity and gas networks performance report. This is the first combined annual electricity and gas distribution networks performance report. The report replaces the previous separate electricity performance reports (published since 2020) and gas network performance reports (published since 2021).
The report analyses the key outcomes and trends in the operational and financial performance of 25 Network Service Providers (NSPs) regulated by the AER under the National Electricity Objective (NEO) and National Gas Objective (NGO). It is a point in time report, covering the regulatory period up to June 2023.
The report found that in 2023, after adjusting for inflation, electricity consumers on average paid the lowest cost for electricity network services since the beginning of our dataset. While after including inflation the average electricity network costs increased for consumers, it remains well below the 2015 peak.
The report also found that gas distribution network costs were the lowest costs since the series began in 2011, both in real and nominal terms.
In addition, measured outages in both electricity and gas have been less frequent, and reliability performance is at a near all-time high.
These outcomes have been achieved primarily by favourable conditions in the external environment including low inflation and low interest rates, as well as network outperformance under incentive-based regulation.
However, these trends will change going forward. Since 2022 inflation has been rising and has subsequently led to rises in interest rates which will increase allowed rates of return in coming years. We also saw an increase of 19.7% in electricity network capex in real terms in 2023, with capex expected to increase further as transmission networks undertake approved capex from Integrated System Plan projects, including EnergyConnect and Humelink.
In this environment, it is imperative that there is a renewed focus on network utilisation. The report found that network utilisation has been relatively flat since 2014, with 2023 values remaining consistent with previous years. As any new network infrastructure will be paid by consumers, it is critical that networks are effectively utilising their current infrastructure for distribution services, looking for non-network solutions and avoiding any unnecessary future infrastructure investment.
To complement the report, the AER plans to release its 2024 Export services network performance report in December. This report will analyse the performance of distribution networks in providing services to consumers who export electricity back into the grid.