Essential drops plan to increase bills, despite court victory

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).