Power Water asset upgrade blocked by regulator over cost of living fears

A bold bid by Power Water to invest almost a billion dollars in infrastructure upgrades has been knocked back by the regulator. Find out why.

The national gas industry regulator has rejected Power Water’s proposed $1bn upgrade to its electricity assets because it would jack up customer power bills.

On the back of Monday evening’s Top End blackouts which left up to 20,000 customers without electricity, the NT News can reveal Power Water had to re-submit its plan after the power industry regulator knocked back its bid to upgrade its power infrastructure.

In February 2023 Power and Water submitted a five-year plan that proposed substantial upgrades to ageing electricity infrastructure to prepare the NT’s energy systems for a renewables transition.

But the Australian Energy Regulator rejected key aspects of the proposal, forcing the government-owned corporation to scramble to submit a revised plan by last November’s deadline.

Power and Water proposed investing $987m between 2024-29 to upgrade electricity networks and systems including replacing poles and wires in Darwin that were last upgraded after Cyclone Tracy.

Central to the asset revitalisation was installation of renewables-compatible infrastructure and updated information and communications technology to improve customer service and security.

In its draft determination on Power Water’s submission the Australian Energy Regulator questioned the cost of living impacts of the changes.

“Our draft decision comes at a challenging time for energy consumers and the sector more broadly,” AER’s draft response began.

“It seeks to balance affordability with necessary expenditure required to support the energy transition. Consumers are facing cost-of-living pressures and affordability is a key issue.”

AER said the number one priority for Australians was reducing cost increases for household bills and that 84 per cent of Australians are worried about electricity bills.

Conversely, it said 43 per cent of Australians thought the country should transition to renewables by 2040.

In its interim reply, AER ran a line through Power Water’s plan to recover $1.02bn from customers and slashed proposed revenue by 6.8 per cent.

“The decrease in overall revenue is mainly driven by our draft decision reductions to Power and Water’s capital expenditure (capex) and operating expenditure (opex),” it said.

“Our assessment recognises that Power and Water’s network is very different to others in Australia. There are three physically separate networks over a wider geographical area with a lower population density, regularly facing diverse extreme weather conditions. These differences have informed Power and Water Corporation’s proposal and how we assess the proposal.”

AER said Power and Water submitted a “reasonable quality” regulatory proposal which it said was a “step up in quality” compared to previous submissions.

“We think there is still scope for improvement in terms of its engagement with consumers and in the provision of key information to explain and justify its proposal.”

In its revised proposal submitted on November 30, 2023, Power Water cut its revenue projections by $41.7m, although still $31.5m higher than AER’s proposed decision.

A final determination by AER is expected in April.

Power Water has been contacted for comment.