Power bills down as regulator unwinds NSW networks' gold plated gains

NSW residential and small business power consumers expected to see 10% drop in bills as regulator unwinds the huge blow-out in power network revenues of prior five years.

The Australian Energy Regulator has elected to slash the NSW power network companies proposed capital and operating expenditure for 2014-19 period, with residential and small business consumers expected to see reductions of 10% in their power bills.

AER chairman Paula Conboy said: “We estimate that our draft decisions, if implemented, would reduce annual electricity bills for a typical residential household living in NSW, on average, by $219 (10 per cent) in 2015–16.

“Similarly, annual electricity bills for small business customers, such as shop owners, would reduce by an average of $360 (10 per cent) in 2015–16. These reductions would be followed by small increases in each of the three subsequent years.”

The draft decisions go a long way towards bringing network businesses’ revenues back down towards levels that prevailed prior to the debacle that was the advent of the new national regulatory rules brought in under the Howard Government’s watch in 2007. As the charts below illustrate, most NSW network businesses experienced huge growth in their allowable revenue in the prior five year regulatory ruling even as power demand plateaued. The AER in its draft decision says it plans to largely unwind this cost explosion. Time will tell whether these draft decisions are watered down in the final decision. No doubt both the networks and NSW Treasury working towards privatisation of these networks will protest vigorously.

Indeed John Bradley, Chief Executive of the networks lobby group was out today trying to generate fear that customers would suffer. He stated, “In NSW and ACT, the AER would cut distribution operating expenditure to a level not seen in 10 to 13 years – it seems implausible that this can be achieved without customer impacts. If implemented, these funding cuts put at risk key consumer outcomes relating to safety, maintenance and outage response times.”

Although if you take the time to look over the electricity network benchmarking report released today by the AER you might ask why this should happen when privately-owner Victorian and South Australian network companies deliver quite similar levels of service at lower cost.

In terms of Transgrid, the transmission backbone operator, revenue will be cut down to around $700m per annum, saving the average residential consumer a little above $20 per annum.

For Ausgrid their allowable revenue will be slashed from more than $2 billion per annum closer to $1.3 billion, saving the average residential consumer $189 per annum.

Endeavour Energy will have its annual revenue cut back to the levels prior to the free-for-all regulatory regime introduced under the Howard Government and defended by Labor’s Energy Minister Martin Ferguson as necessary catch-up on past underinvestment. This is expected to save the average residential consumer $159 per annum.

Likewise Essential Energy will also see their annual revenue cut back to the levels prior to the Macfarlane-Ferguson regulatory regime. This is estimated to save these rural residents $346 on their bill in 2015-16.

And it's also back to the past for ActewAGL, allowing the average residential customer’s annual bill to fall by $182 in 2015-16.

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