Consumer group cleared for legal challenge to NSW network prices

A consumer-led legal challenge to force down electricity prices in NSW will proceed to a full hearing, after being waved through by the Australian Competition Tribunal.

The landmark Public Interest Advocacy Centre (PIAC) campaign, the first such legal bid to be mounted by a consumer advocacy group, challenges the Australian Energy Regulator’s recent pricing determinations for NSW electricity network operators Ausgrid, Endeavour Energy and Essential Energy.

As we reported at the time, the AER’s April 30 determinations, which effectively cut the revenue of energy networks by around one-third, had the effect of pleasing no one in NSW, resulting in legal challenges from both from consumers and the networks.

According to Networks NSW, annual average household electricity bills will fall by up to 12 per cent following the decision, which it said had been made using “flawed and unreliable benchmarking to justify cuts to operating expenditure.”

Of course, PIAC’s legal challenge argues the opposite: that the AER ruling will allow the NSW networks to continue to operate inefficiently over the next four years, keeping electricity prices unnecessarily high for consumers.

PIAC will argue at the hearing, which is slated to begin on September 21, that the AER has failed properly to implement the rules on the costs that can be charged to consumers to run the NSW electricity network, and on the electricity networks’ borrowing costs.

PIAC CEO Edward Santow says the Tribunal’s decision to allow the case to proceed to a full hearing is encouraging for consumers.

“The Tribunal accepts that there are important questions to be determined about how electricity prices will be set in NSW over the next five years,” he said in a statement on Friday.

And if the challenge is successful, PIAC says the average annual electricity bill for NSW households could be reduced by more than $150 below the regulator’s determination in 2016.

Meanwhile, the three network businesses are seeking an extra $5.6 billion from consumers, potentially raising the average NSW bill by around $420 next year, PIAC says.

The networks have also tried to stop the PIAC challenge from going ahead, some of them – including Ergon Energy and AusNet – appealing to the tribunal to intervene in the review of the AER’s pricing determination.

Interestingly, the Abbott government’s minister for industry and science, Ian Macfarlane, also registered his intention to intervene in the legal proceedings, taking the side of the networks.

As we have noted before, the legal battle was expected to potentially impact the timing and value of Premier Mike Baird’s planned $13 billion power asset sale – the NSW government plans to lease 51 per cent of Ausgrid and Endeavour Energy.