AER cracks down on poles and wires to cut electricity bills

The Australian Energy Regulator (AER) has rejected proposals from NSW electricity distributors to bolster the network with more poles and wires in the hope that the pass-through cost savings will reduce power bills by as much as $60 a year for the state’s business and household customers.

The regulator revealed on Wednesday its decision to issue placeholder determinations for ActewAGL, Ausgrid, Endeavour Energy and Essential Energy, downgrading the revenue amounts that the four businesses could recover from their customers in 2014-15.

“The AER has not accepted the revenue allowances proposed by any of these four businesses for the transitional year,” AER chairman Andrew Reeves said in statement, adding that the regulator had instead applied a lower rate of return and corporate tax allowance, consistent with rate of return guideline and recent market trends.

“Because the demand for electricity has been less than expected, the …businesses over-estimated capital expenditure and subsequently underspent between 2009 and 2014. The AER has required the businesses pass on these cost savings to end users,” Reeves said.

For a typical customer, these network service charges represent about 40 per cent of the total electricity bill with generation costs, transmission charges and retailer’s charges making up most of the remainder.

As can be seen in the tables below, the AER estimates that its decision will reduce household electricity bills by an average of $38 a year in NSW and $19 in ACT. Electricity bills for small businesses are expected to be cut by an average of $60 annually in NSW and $29 in ACT.

The tables also show the indicative impact on annual charges if the AER had accepted the businesses’ proposals.