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Essential drops plan to increase bills, despite court victory

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New South Wales state-owned electricity distribution company Essential Energy has decided not introduce power price rises for its more than 800,000 rural customers, after winning a two-year multi-million dollar court battle to be allowed to do just that.

In a proposal delivered to the Australian Energy Regulator last week, Essential Energy said it had decided not to take advantage of a Federal Court order from July that would have allowed it to lift its total revenues by about $300 million, via higher power bills.

Rather, the company would see a 28 per cent reduction in revenue from 2014/15 to 2018/19, with an increase on July 2018 forecast to be in line with the consumer price index.

“While the precedent set by the Federal Court is important, Essential Energy has proposed to not recover this potential additional revenue in order to keep downward pressure on network charges,” the company’s CEO, John Cleland said in a statement.

Essential Energy, alongside fellow NSW government-pwned distribution firms Ausgrid and Endeavour Energy, wound up in the Federal Court after a stand off with the AER that began back in November 2014, when grid operators petitioned to boost their spending by as much as 50 per cent.

That proposal was slapped down by the AER – which itself was under pressure for allowing too much spending by the networks – with the regulator eventually determining in April 2015 to cut the proposed budgets of Networks NSW by around one third.

After a failed appeal to the Australian Competition Tribunal, the networks took the unprecedented step of challenging the decision in the nation’s top court – and winning.

Essential said the decision not to impose the hard won price rises – even despite spending millions on legal fees to battle the AER – was based on the company’s strategic objectives of delivering best value for customers and “real reductions” in distribution network charges.

“The major benefit of (the) proposal is the avoidance of significant price shocks for customers for the current and next regulatory periods,” Cleland said in a letter accompanying the proposal.

And this much is true. As we reported here in May, the AER’s Federal Court loss was seen as a significant blow to consumers – already suffering from some of the highest electricity prices in the developed world.

Cleland said the new proposal from Essential Energy had been strongly influenced by an “extensive customer engagement program” that had given the business a better understanding of customer preferences, particularly on affordability.

“This increased understanding directly informed our approach to this proposal and represents an ongoing cultural change in how we approach strategy and proposal development, placing the customer at the centre of all submissions,” he said.

The apparent change of heart by Essential has been welcomed by consumer groups, both for the “economic relief” it will bring to regional NSW energy consumers, and for its recognition of the importance of customers, particularly as more and more make the switch to rooftop solar and storage in the fight against rising power prices.

“Network businesses need customers as much as customers need the networks,” said Energy Users Association of Australia chief Andrew Richards on Monday.

“We hope that Essential Energy’s decision to prioritise customers and look at improving efficiencies within its business will influence NSW’s other network companies to reconsider their planned price increases as well.”

(Editor’s note: As a household consumer in the Essential network, paying a fixed network charge of $1.65 a day (or $560 a year), I say about bloody time).  

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  • mick

    they saw the writing on the wall why would you stay on grid now let alone in the future

  • Joe

    Essential are taking the pisses here. I mean in July consumer tariffs go up by double digits and they’ve just given their CEO a ‘performance bonus’ ( my description ) 15% pay rise so that he pockets a tidy little earner of $882,000.00 per year. This is on the back of 600 staff positions to be axed. Any Joe blow off the street can sack staff and raise prices and Essential pay the CEO dude… $882,000.00 per year to do that…c’mon ya can’t be serious Essential.

  • Robert Westinghouse

    Essential is government owned? The government is (supposed) to look after the good of the people. They gouged the bush 23% in July. How much more can we take? Better stop and allow the patient to recover before Essential sticks the knife in AGAIN…. I do not trust them. Corporatisation, economic rationalism, commercialisation of PUBLIC essential assets…another study is robbing the poor to make the rich richer…. Stop it…. CTP, Health Insurance, Roads, Telco’s, Gas, Electricity…all social failures…. WTF social democracy…total rubbish in Australia. Weclome to Australia, High per capital GDP one day…3rd world country the next

    • MaxG

      Welcome to the modern corporatocracy 🙂
      Democracy has been dead for decades.

      • Robert Westinghouse

        You are right. As I was writing to an American…both sides of politics in Aus had introduced, legistlation, rules, compliance that is killing off small business. Concentration is killing competition and the people are suffering. I am far poorer now with all the COMPULSORY charges, levies, fees, charges, forced insurance etc….they are all a-holes…..

        • MaxG

          It can be summarised to this: anything that makes a profit needs to be corporatised in the eyes of every rent seeker.
          Corporations will lobby for this as long as there is a social/public ‘enterprise’ working for the people and a profit can be made.
          E.g. electricity, water, etc. And big consumers pay less than the individual; e.g. bottlers pay 1/1000th per kilo litre compared to the individual.

  • rob

    FOR GODS SAKE PROOFREAD YOUR ARTICLES B4 POSTING @SOPHIE……FFS SO MANY GRAMMAR ERRORS OR NONSENSICAL SENTENCES, WORDS MISSING ETC …….SERIOUSLY HOW DID YOU GET A JOB IN PUBLISHING? FIX IT NOW!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! POSTED AFTER READING ONE PARAGRAPH…(2 WORDS MISSING)

    • OnionMan77

      plz kepp tha triky speling. it sorst eth shep frmo teh groats.
      <> iz perfucktly cromulent describificvation off da realty.

      • rob

        Didn’t understand ! 1 word of your reply,,,,,,,,perhaps you were “sophie’s” TEACHER…….WANKER!

        • MaxG

          We all have our pet hates… no need to get personal.

      • Scottman

        Great description. I understood every word.
        Yeah I am also in Essential area, My PV & PV diverter negates the exxxesive charge. Hooray for meski.

  • >>Essential Energy had been strongly influenced by an “extensive customer
    engagement program” that had given the business a better understanding
    of customer preferences, particularly on affordability.

    Corporate speak for “people are complaining about high prices and we are losing customers”?

    • Andrew Thaler

      government speak for the government is heading into a state election and we are getting smashed for having the highest electricity prices in Australia.

    • Chris Fraser

      But that’s not all ….
      Essential spent millions in the Federal Court for the right to charge whatever it likes. And then, for reasons that perhaps commenters have alluded to, Essential has a kind of epiphany asking itself Who are our customers, or What are we here for ?It matters little now that they won, indeed had nothing to lose, or existed only for their executive salaries. What were thinking now is Essential gets to enjoy a harvest of breaching the trust of all their customers especially disadvantaged ones.

  • Hettie

    Giles! With Powershop, buying online at their online saver rates, you would be charged $1.3999 per day for the poles & wires. Including GST.

    • not true. we were on powershop and they vary their fixed charges according to how much you draw from the grid. because we only draw an average 2kWh a day, we found it better to go elsewhere.

      • Hettie

        Interesting. I’ve been with them for nearly 2 years now, and have only recently gone solar, so that my daily usage from the grid has dropped to around 2kwh/day.
        I will watch for a hike in the standing charge.
        Thanks for the heads up.

        • Scottman

          Go Enova. Tops!

  • Dan

    “After a failed appeal to the Australian Competition Tribunal, the networks took the unprecedented step of challenging the decision in the nation’s top court – and winning.”

    This is actually quite incorrect and obliviously has been manipulated to add weight to an argument. Essential mostly won the tribunal and it was the AER that took it to the federal court.

    https://www.aer.gov.au/news-release/federal-court-judgement-on-aer-electricity-and-gas-price-decisions-disappointing-outcome-for-nsw-and-act-consumers