Following a comprehensive two-stage engagement process, the AER today released its 2024 Annual Benchmarking Reports for electricity distribution and transmission.
The Annual Benchmarking Reports are used by the AER and industry to benchmark distribution network service providers’ (DNSPs) and transmission network service providers’ (TNSPs) productivity over time, against other networks and the economy.
Key findings in this year’s reports include:
- After decreasing over the 2006–15 period at an average annual rate of 1.4%, electricity distribution industry productivity has since trended upward by 0.9% per year. Similarly, electricity transmission industry productivity improved between 2016 and 2018 at an average annual rate of 3.2%, after which it stabilised. This was after having declined over the period 2006–16 at an average annual rate of 1.8%.
- As productivity has trended upward since 2015/16, it has been one contributor to the downward pressure on the network cost component of electricity bills after 2015/16. This improvement is primarily due to reductions in operating expenditure and slower growth in capital asset inputs relative to earlier years.
- In 2023, distribution industry productivity decreased by 2.5% and transmission industry productivity decreased by 1.0%, primarily driven by increases in operating expenditure.
This year’s reports include updated methodologies and data that have been supported by industry, and the outcomes of development work undertaken to independently review output weights.
The reports also identify priority areas for future development work, including in response to stakeholder submissions received during the development of this year’s reports.
Background
The Annual Benchmarking Reports support the AER’s work in regulating electricity networks in the long-term interests of consumers.
The 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.
Our benchmarking is also used to inform our assessment of the efficiency of network expenditure proposals.
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.