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Regulatory Framework
Three key changes have occurred in the regulatory framework applicable to EnergyAustralia in the last five years:
• Commencing in January 2008, responsibility for regulating energy distribution networks was transferred from the various state-based regulators (IPART in NSW) to a new national specialist regulatory, the Australian Energy Regulator (AER).
• At the same time, the National Electricity Code, which governs how network businesses are to be regulated, has undergone significant amendment, resulting in the new National Electricity Rules.
• The Department of Energy, Utilities and Sustainability (now the Department of Water and Energy) added mandatory conditions to EnergyAustralia’s distribution licence regarding network design and planning, and reliability outcomes.
2009-14 Regulatory Proposal
On 2 June 2008, EnergyAustralia filed a Regulatory Proposal with the AER to approve revenues and prices for electricity distribution services for the period from 1 July 2009 to 30 June 2014.
EnergyAustralia’s Regulatory Proposal provides information to the AER on the amount of investment required in the network over the next five years to:
• Serve growing demand for electricity and customer connection
EnergyAustralia is witnessing an increase in domestic air conditioning use that continues to drive up peak demand. In the residential sector, peak demand growth outstrips energy growth by a wide margin
• Replace ageing assets
EnergyAustralia has the oldest energy distribution network in Australia, with many assets over 50 years old. As these assets age, their ability to provide a safe, secure, and reliable energy supply decreases.
• Comply with the DWE network planning and reliability licence conditions
The DWE licence conditions drive investment to ensure sufficient equipment is in place to restore supply quickly in the event of a failure.
The key features of EnergyAustralia’s Regulatory proposal include:
EnergyAustralia will invest $8.66 billion between 2009-14 to meet our obligations in providing a quality network service to our customers including:
• $443 million for additional capacity in the transmission system to meet demand growth and replacement needs;
• $612 million in the Sydney CBD for two new zone substations and increased downstream capacity;
• $2,894 million for 42 new zone substations, and retirement of 32 zone substations;
• $1,828 million for replacement of assets throughout the network ;
• $504 million to enable customers to connect to the network;
• $698 million to increase capacity in the 11kV system in line with the licence conditions;
• $295 million to increased capacity in the low voltage system; and
• $285 million to upgrade key elements of the network to modern standards.
Operating expenditure for the period is forecast to be $2.97 billion. This incorporates the significant impacts of:
• increased workload largely arising from the larger asset base, adding approximately 25 percent to direct maintenance costs;
• increased workload due to the average age of certain asset classes, which requires more preventative and corrective maintenance;
• increased costs for labour and materials for the electricity supply sector.
The operating cost increase in the next period is consistent with the growth in the size of the network, input cost escalations and step changes required to meet new obligations and improve management systems.
The distribution component of customer energy bills will rise as a result of this investment program. A typical household customer is likely to see a first year increase on their total energy bill of around 14% or $2 per week.
The Australian Energy Regulator is conducting a public consultation process on EnergyAustralia’s Regulatory proposal. (Please note this file is 4MB) More information is available from the website.
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