The AER has updated its Values of Customer Reliability (VCR). These values seek to reflect the value that different types of customers place on reliable electricity supply and were last updated in 2019.
The updated values will be used as key inputs for energy businesses and the AER in determining the appropriate level of investment in reliability. The VCR cover unplanned outages of up to 12 hours, the most common type of unplanned outage in the electricity system.
For the 2024 VCR update, we used the same survey-based methodology as in 2019, but we changed one of the data inputs to use more detailed data based on meter readings for individual customers. This will allow the AER to use more detailed and accurate residential consumption data to calculate the VCR, now and into the future.
The headline results of our 2024 VCR review are:
- The 2024 residential VCR are higher than the 2019 VCR for all residential segments, with one exception, although not uniformly so. This is driven by a higher willingness to pay to avoid outages as well as lower electricity consumption lost in outages.
- The 2024 business VCR are significantly lower than the 2019 VCR, with the largest decline occurring in the industrial business segment. This change is primarily driven by business customers, on average, willing to pay less for reliability as a proportion of their electricity bill.
- The 2024 very large business VCR are significantly lower than the 2019 VCR, with the exception of the services segment increasing between 2019 and 2024. Some of the factors contributing to this outcome are different composition of the survey respondents as compared to 2019 as well as higher consumption and lower outage costs reported by most survey respondents that participated in both 2019 and 2024 surveys.
We will be engaging with stakeholders on the next steps associated with our VCR work early in 2025. This will include seeking feedback on:
- the lessons from 2024 VCR process
- our approach to the annual adjustment mechanism
- what further VCR related analysis or approaches may support the next VCR review
- the timing of the next VCR review.