AEMC acts to smooth network price shocks

by Vivid User | Mar 09, 2017
The Australian Energy Market Commission (AEMC) has published a consultation paper on smoothing the impact of potential price shocks to customers following completion of court proceedings currently underway between the NSW/ACT networks and the Australian Energy Regulator (AER).

Back in April 2015 the AER controversially handed down sweeping price cuts to the NSW and ACT distribution businesses Ausgrid, Endeavour Energy, Essential Energy and ActewAGL. These saw prices for the network component of customers’ bills cut by up to 30% from 1 July 2015. However, with the networks and the AER now contesting this decision in the high court and nobody knowing when we may have an outcome, time is running out to adjust network prices should the court go that way.

Under the current National Electricity Rules, the AER determines how much revenue the networks may recover from their customers for each year in a five year period. The current five year period commenced on 1 July 2014 and ends 30 June 2019, so it has just over two years to run. The problem here is that, should the networks be successful (and they may not be), there is not very much time left for them to recover any lost revenue before the five year period ends and they are currently not allowed to carry any revenue over into the following five year period.

To prevent massive bill shock should the networks prevail (and even if they do they may not have all of the cut restored), the AEMC is consulting on allowing networks to spread lost revenue over the remainder of this five year period and the next five year period as well.