Plan to rein in utility spending
The so-called "gold-plating" of the electricity network has forced prices significantly higher over the past five years, resulting in a consumer backlash and a reduction in energy consumption.
Prices across the country have risen by more than 50 per cent.
To prevent electricity companies from unnecessary spending, which enables them to boost user charges even if the outlays have not been approved, a number of regulatory reforms are to be introduced which will give the authorities the power to force utilities to cut outlays.
"We will use benchmarking and other techniques to assess the need for and efficiency of spending proposals," said Andrew Reeves, the chairman of the Australian Energy Regulator.
NSW network companies have been criticised in the past for having higher costs than their Victorian counterparts, which are now in the process of being addressed.
Electricity distributors will be forced to introduce more efficient ways of providing services, as well as to ensure that customers benefit if spending is cut below planned levels, rather than the benefit flowing to the utilities.
Frequently Asked Questions about this Article…
Electricity utilities are being forced to cut unnecessary spending to prevent them from increasing user charges without approved outlays. This move aims to address the issue of 'gold-plating' the electricity network, which has significantly driven up prices over the past five years.
'Gold-plating' refers to the excessive and unnecessary spending by electricity utilities on infrastructure, which has led to a significant increase in electricity prices and a consumer backlash.
Electricity prices across the country have risen by more than 50% over the past five years, largely due to unnecessary spending by utilities.
New regulatory reforms will give authorities the power to force utilities to cut unnecessary outlays. These reforms include using benchmarking and other techniques to assess the need for and efficiency of spending proposals.
The Australian Energy Regulator will use benchmarking and other techniques to evaluate the necessity and efficiency of utility spending proposals, ensuring that only essential and efficient expenditures are approved.
NSW network companies have been criticized for having higher costs compared to their Victorian counterparts. Efforts are now underway to address these cost discrepancies.
Electricity distributors will need to introduce more efficient ways of providing services and ensure that any savings from reduced spending benefit customers rather than the utilities themselves.
Customers will benefit from the new spending controls as any reductions in planned spending will result in cost savings that are passed on to them, rather than benefiting the utilities.
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