Urgent reform needed to shield consumers from yet another round of grid gold plating
Nearly 10 years after a federal inquiry identified “gold plating” as a major contributor to power prices in Australia, experts are warning it will happen again without urgent reform.
Three distribution network service providers (DNSPs) in some of Australia’s most rooftop solar saturated grids are proposing 20-22% increases in capital expenditure (capex) for 2025-2030.
it’s unclear why the DNSPs, all of which have over 45% of households with rooftop solar and a growing number of home batteries, are seeking such big increases, when network use is decreasing.
The cost of building, replacing and maintaining the poles, wires and substations of the network typically accounts for 25%-35% of electricity bills.
Past network over-investment, or "gold plating" increased the value of the regulatory asset base per customer by 60% between 2006 and 2015, causing large increases in electricity bills.
This is happening at the same time as some network companies are looking to charge solar households for exporting power to the grid – a move they say is necessary to cover growing costs of accommodating rooftop PV on their grids.
Historically, the push by network companies to spend more and more on grid augmentation has coincided with a slump in network use, which fell from 57% in 2006 to 39% in 2015.
This has since levelled out, but over the 2006-2022 period the per-customer value of the regulatory asset base rose 34%, while network utilisation fell 15%.
It means consumers are now paying much more for a service they are using less than in 2006.