SP AusNet prevented from lifting meter costs
The regulator, an arm of the competition watchdog, also criticised the company for failing to switch to cheaper technology to avoid an increase in costs.
Earlier, the regulator cut to $304.1 million from $410.7 million SP AusNet's proposed expenditure for the introduction of the meters between 2012 and 2016, triggering a legal challenge by the power distributor.
Since the legal challenge failed, consumers will not be charged for cost overruns. SP AusNet has not ruled out challenging the decision, saying it would "carefully review" it before deciding on a response.
The regulator argued that "a reasonable business" would have reconsidered which equipment to install following a rise in costs.
"The allowance for 2011 that the [regulator] originally approved would have been more than sufficient to cover the costs of switching to the alternative technology," the chairman of the regulator, Andrew Reeves, said.
If SP AusNet's proposal had been approved, meter prices would have risen by approximately 16 per cent each year in 2014 and 2015 on top of the 7 per cent allowed previously by the government.
No price rise was considered necessary to account for the cost of switching technologies, the regulator said, although some provision was agreed to be made for foreign exchange contracts and project management, which would increase SP AusNet's allowance by $17.5 million.
"The effect is that current meter prices will increase by approximately 3 per cent each year in 2014 and 2015 on top of the 7 per cent previously allowed," the regulator said.
For the standard meter, this means prices will increase by $12.93 in 2014 and $14.22 in 2015.
The Victorian government approved a state-wide introduction of smart meters in 2006. Since then the cost of the introduction has risen steeply even though the cost of the basic technology has declined.
SP Ausnet could not be contacted to respond to the decision.
Frequently Asked Questions about this Article…
The Australian Energy Regulator (AER) blocked SP AusNet from increasing charges to pay for its smart meters. The AER also reduced the amount it would allow SP AusNet to spend on the rollout and criticised the company’s decision not to switch to cheaper technology when costs rose.
The regulator cut SP AusNet’s proposed smart meter expenditure from $410.7 million to $304.1 million for the rollout between 2012 and 2016.
No. Because the company’s earlier legal challenge failed, the AER’s decision means consumers will not be charged for the cost overruns related to the smart meter program.
The AER said a “reasonable business” would have reconsidered which equipment to install after costs rose. The regulator stated that the allowance it originally approved for 2011 would have been sufficient to cover switching to alternative, cheaper technology.
According to the regulator, current meter prices will increase by approximately 3% each year in 2014 and 2015 on top of the 7% previously allowed by the Victorian government—not the much larger rises that SP AusNet had proposed.
For a standard meter the regulator said prices would increase by about $12.93 in 2014 and $14.22 in 2015.
The Victorian government approved a state-wide introduction of smart meters in 2006. The article notes that since then the total cost of the rollout has risen steeply even though the basic technology itself has declined in price.
SP AusNet said it would “carefully review” the decision before deciding on a response and has not ruled out challenging it. The company could not be contacted for further comment, and an earlier legal challenge to the regulator’s cuts had failed.
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