Utilities' spending faces cuts
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 planned spending to prevent unnecessary expenses that have led to significant price increases over the past five years. New controls are being introduced to challenge these outlays and rein in spending, ensuring that costs are kept in check for consumers.
'Gold-plating' refers to the excessive investment in electricity networks, which has driven prices significantly higher. This practice has resulted in a consumer backlash and a reduction in energy consumption as people seek to manage their costs.
Electricity prices across the country have risen by more than 50% over the past five years, largely due to unnecessary spending by utilities.
Regulatory reforms are being introduced to give authorities the power to force utilities to cut unnecessary outlays. These reforms will include benchmarking and other techniques to assess the need for and efficiency of spending proposals.
The new spending controls will ensure that any savings from reduced spending benefit consumers rather than the utilities. This means that if spending is cut below planned levels, customers will see the benefits in the form of lower charges.
The Australian Energy Regulator, chaired by Andrew Reeves, will use benchmarking and other techniques to assess the need for and efficiency of spending proposals, ensuring that utilities only spend what is necessary and efficient.
NSW network companies have been criticized for having higher costs compared to their Victorian counterparts. This issue is currently being addressed as part of the broader effort to control unnecessary spending and improve efficiency.
Electricity distributors are expected to introduce more efficient ways of providing services. This includes ensuring that any cost savings from reduced spending are passed on to customers, rather than benefiting the utilities themselves.
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