South Australia Power Networks has been cleared to recover more than $5 billion from the state’s electricity customers over the coming five years, as inflation drives up the cost of delivering safe and reliable power, including the rapid integration of consumer energy resources.
The Australian Energy Regulator (AER) on Wednesday published its final decision on the revenue proposal submitted by network comapny SAPN for 2025–30, allowing for $5,207 million in revenue to be recovered from consumers over the five years from July 01.
The approved amount is slightly higher than the $5,168.1 million proposed by SAPN, and a good deal higher – $1,298.8 million, or 33.2 per cent – than the amount approved for 2020–25, a jump the AER says has been driven by higher inflation and interest rates, driving higher capital and operating costs.
For households in the state, the regulator says this could increase the average annual electricity bill by around $9 a year over the five-year period, while for small business customers, the impact is estimated at an increase on average of $22 a year.
For residential customers without rooftop solar and/or with higher usage – a segment of the population the regulator says it was asked to assess separately this time around – there could be an increase on average of $14 a year.
AER chair Clare Savage says the regulator “rigorously scrutinised” SAPN’s proposed expenditure, in a bid to strike a balance between the cost-of-living and affordability concerns of consumers, and adequate support for a network operating “at the forefront of greater reliance on renewable energy, including household solar adoption.”
South Australia’s electricity grid is currently supplied by a world-leading share of 72 per cent wind and solar, on the path to an accelerated target of 100 per cent net wind and solar by the end of 2027.
The state’s rooftop solar capacity, alone, has supplied more than 100 per cent of demand on a number of occasions, including in December last year when it reached a peak penetration of 107.5 per cent of state demand in the early afternoon on a Sunday.
As Renew Economy reported in December, all this variable renewable energy has not affected South Australia’s energy reliability or security, thanks to the installation of synchronous condensers – spinning machines that do not burn fuel. More grid-scale battery storage and boosted interstate links will also help.
Meanwhile, SAPN has been spearheading some of the country’s, if not the world’s, most progressive programs to get the grid up to speed on consumer energy resources, including the introduction of flexible rooftop solar exports to better control the huge amounts of consumer PV flooding the grid during the day.
“We have rigorously scrutinised SA Power Networks’ proposed expenditures to ensure consumers pay no more than necessary for safe and reliable energy, while enabling the business to address important emerging issues such as network cybersecurity, climate resilience, and integration of consumer energy resources,” Savage said on Wednesday.
“The final decision accepts substantial parts of the initial and revised proposals. However, there are areas – particularly for augmentation expenditure – where we did not accept the forecast and substituted our alternative forecast.
“This included adopting lower demand forecasts that are more up to date, which has reduced demand driven capital expenditure.”
The AER has also factored in reduced costs from the end to South Australia’s solar feed-in tariff scheme in 2028. “This will provide for more stability and means consumers will benefit from lower increases in network revenue in the initial years of the next regulatory period,” Savage says.
Savage says the AER’s decision has highlighted the importance – and value – of network consultation and engagement with consumers, to balance service levels and prioritise areas of expenditure.
“SA Power Networks demonstrated strong commitment to engaging with their customers, including through working with their Community Advisory Forum to make sure consumer preferences were taken into account in the revenue proposal,” she said.
This was evident, Savage says, in the refinement of SAPN’s innovation fund and the further development of solar soak tariffs and two-way pricing in a way that is able to be packaged by retailers to reward consumers willing and able to shift more of their use into periods of lower electricity prices during the day.
“We see price signals as a low-cost mechanism to incentivise customers (through their retailers) to increase utilisation of existing capacity and to reduce long run costs,” the AER says in its Final Decision report.
“In South Australia, minimum operational demand is an emerging challenge. Tariff reform can assist with this challenge by encouraging greater consumption and less exports during low demand periods.
“This reduces the risk of disruptions to electricity supply and/or the need for investment to manage exports or increase network export capacity. It subsequently reduces future network costs and leads to cheaper electricity bills in the long run.”
The report also notes that recent regulatory changes have increased the emphasis on the role of retailers in innovating to manage network costs.
“With increasing levels of CER, we anticipate more retailers and intermediaries will be developing business models that seek value from cost reflective tariffs and flexible load/supply,” the report says.
“We encourage retailers to continue to innovate to access this value through helping consumers that are willing and able to shift and reduce their load, including through drawing on energy efficiency initiatives and offering flat retail tariffs where this is preferred by customers.”
To this end, SAPN has been working with retailers including Engie on a groundbreaking trial that is offering to pay customers to curtail their rooftop solar exports when prices are negative, rather than pay a “sun tax.” You can read more about that, here.
“We expect these [sort of] tariffs will contribute to improving the utilisation of network assets over time reducing future network costs,” Savage said on Wednesday.
All of this seemingly collegiate consultation between regulator, network and retailer, and an across the board push to better consider the needs of customers, paints a starkly different picture to this time a decade ago, when SAPN went to the Australian Competition Tribunal to challenge the AER’s 2015-2020 revenue determination in the hope of recovering an additional $250 million.
The challenge was not successful.
