Regulator turns up the heat
The regulatory arm of the NSW government has expressed concern that the review of the spending plans of the gas and electricity sectors may remain stacked in favour of infrastructure owners under proposed changes.
The Independent Pricing and Regulatory Tribunal (IPART) was commenting on Monday after it allowed AGL to raise retail gas prices by 9.2 per cent from the beginning of next month, with smaller price rises for Canberra (5.5 per cent). Origin Energy was allowed to raise prices in Wagga Wagga by 5.8 per cent and southern NSW by 5.2 per cent.
The main reason is the heavy spending on the gas network by its owner, Jemena, which is in the process of being acquired by the Chinese government. Along with the 5.5 per cent rise won by Jemena, prices will increase by about 5 per cent again from the middle of next year, as it seeks to clear a backlog of capital works.
Much of the gas network was built in the 1970s and is now at the end of its economic life, a Jemena spokesman said. Other factors include expanding the network, with an additional 250,000 users now connected to the gas grid.
From 2015, the gas price rises for the network part of the bill are likely to be about the rate of inflation, he said. Smaller price increases of up to 3.2 per cent for electricity users in NSW have been approved from next month.
Concerned with the way infrastructure owners are able to challenge the price-setting process and push prices higher, IPART wanted to remove appeals to the Australian Competition Tribunal, preferring an administrative tribunal, which does not allow lawyers.
"Action is required to address policy settings that are leading to higher than necessary gas network prices," IPART chairman Peter Boxall said.
Most of the regulator's decisions have been appealed and network businesses have never been forced to cut planned price rises, IPART said. In NSW alone, out of $18 billion of spending, this has added $1.9 billion to their revenue over the five-year regulatory period, it said.
Victoria's Consumer Action Law Centre estimates the benefit gained by electricity network operators nationally at $3 billion.
A review of spending plans by federal governments has left the door open for challenges to be made to the Australian Competition Tribunal, and this is expected to inflate gas and electricity bills.
This is because network owners and operators try to "game" the process by challenging rulings to maximise the outcome.
"It still reflects a very formal, court-like process," Consumer Utilities Advocacy Centre head Jo Benvenuti said.