Pressure rises on power bills

Victoria’s biggest electricity distributors are planning to hit customers with further price rises next year.

Victoria’s biggest electricity distributors are planning to hit customers with further above-inflation price rises next year.

However, some customers can expect some relief from years of price rises, with two operators agreeing to price cuts.

A raft of proposals from five Victorian electricity distributors follows the federal government’s moves to curb the networks’ ability to appeal against rulings by the Australian Energy Regulator, amid a broader effort to reverse soaring energy bills.

The proposals to the AER will affect the cost of about one-quarter of each electricity bill, highlighting the range of factors at work in rising electricity prices.

While some distributors proposed tariffs that would cut household electricity bills, others are asking for increases above inflation for residential and business customers.

Australian Competition & Consumer Commission chairman Rod Sims last month said network fee increases had accounted for 41 per cent of the increase in electricity bills in the past decade.

Mr Sims, who is running a federal government inquiry into energy prices, said network costs increased “largely because particular state governments pushed for and achieved looser regulation of these then largely government-owned monopolies” to protect their revenues.

“The weakened rules limited the ability of the AER to ensure consumers pay only for efficient costs,” Mr Sims said.

According to the proposals, released by the AER this week, the network component of residential bills would fall by 4 per cent, or $12 a year, for customers of AusNet Services, and by as much as 6.45 per cent for small business customers of Jemena.

United Energy, which runs a network of more than 12,000km of poles and wires in Melbourne’s southeast and the Mornington Peninsula, wants to increase distribution charges by 5.2 per cent but said the impact on customers would be capped at 0.6 per cent because of a 15.2 per cent fall in transmission charges that are blended into the tariff.

CitiPower, which operates 3227km of poles and wires around Melbourne, is seeking a 1.99 per cent increase in tariffs from January 1 and its sister company Powercor wants a 3.08 per cent increase.

CitiPower also proposed to narrow the difference between summer peak pricing and the rest of the year.

According to results published by Spark Infrastructure, which owns 49 per cent of Powercor and CitiPower, the two business are expected to take an extra $180m of revenue through to 2020 after challenging a draft ruling that imposed harsher cuts in the first year of its five-year agreement with the AER.

Under Australia’s electricity market rules, network companies ask the AER to approve the revenue it can recover from customers over a five-year regulatory period, based on the cost of running the network as well as needed maintenance and capital expenditure.

But the system allows companies to make up cuts imposed in earlier years if the final determination from the AER is more generous than the draft ruling.

Companies have also been able to appeal rulings to the Australian Competition Tribunal and the Federal Court under a so-called limited merits review if they cannot convince the AER of the need for more revenue.

But the federal government has introduced legislation to abolish the limited merits review and a Senate Committee meeting in Melbourne this week heard that challenges to 12 of 20 AER rulings using the LMR had, since 2008, added almost $11bn to electricity bills.

Federal Energy Minister Josh Frydenberg had pushed to abolish the limited merits review as part of suite of measures to tackle soaring energy prices that had also threatened export controls on gas, the buyout of the Snowy Hydro Scheme, demands to extend the life of the Liddell coal-power station in NSW and inquiries by the Productivity Commission and the ACCC.

The AER is expected to consider the proposals and deliver a ruling in the next two months.