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Forecast for residential energy bills reduction: SACOSS welcomes AER decision

SACOSS welcomes the $40 forecast reduction in energy bills for average residential energy consumers next year, resulting from the Australian Energy Regulator’s decision on the amount of revenue SA Power Networks can recover for 2020-2025. 
SACOSS CEO Ross Womersley says: ‘Whilst we welcome this reduction in price, we must be cautious about the drivers of the reduction. These are largely related to the current Rate of Return and changes in the assessment of income tax allowance, rather than a reduction in allowed network expenditure for SA Power Networks over the next five years.’
SACOSS also supports the AER in deciding not to postpone the final decision, despite SAPN arguing for a delay due to the impacts of COVID-19. SACOSS agrees with the AER that while SAPN highlighted the possible costs to the network operator of COVID-19, it did not necessarily address the savings, and it is reasonable to proceed with a decision on allowed revenue, rather than have further uncertainty for the industry.
SACOSS accepts the AER’s decision to support SAPN’s proposed spend on managing Distributed Energy Resources (DER) in the network, with CEO Ross Womersley stating:
‘We recognise additional network spending will be required to manage the increase in solar PV on the network, but we are very keen that the impact of these programs be independently measured and monitored to ensure positive flow-on benefits for customers. We are concerned that many of these programs are not independently tested by scientific study, and there is little to no public transparency and sharing of information. Customers deserve to be informed of the evidence demonstrating how these programs benefit them in the long term.’
SACOSS cautiously welcomes the new tariff structures which encourage consumers to use power when the sun is shining. Usage rates during the solar sponge period of 10am to 3pm are set at 25% of the single rate network tariff, but time of use in peak times is 125% of the single rate, meaning energy will be more expensive if you use it at peak times. SACOSS also welcomes a move to shift consumers currently on controlled load arrangements (e.g.for hot water) to take advantage of the low solar sponge rates during the middle of the day.
Ross Womersley says: ‘These changes to tariffs and controlled load make sense from the point of view of what the system needs, but from an equity perspective, SACOSS will need to examine the uptake and impact of the changes on different consumer groups over time.  The reduced tariffs will only benefit consumers on smart meters, and the increase in peak tariffs after 3pm may have an adverse impact on larger families who can’t reduce or change their usage patterns’.
SACOSS had argued that SAPN shouldn’t be rewarded with a $76m ($2019-20) capital expenditure incentive payment to be paid by consumers over the 2020-25 RCP, but the AER decided to allow the incentive payment. 

Ross Womersley stated: ‘We regard this as material reward to the network and with a total capex allowance of some $1.6 billion for 2020-25, it is essential that the CESS meet its broader objective of rewarding genuine improvements in the efficiency of capex expenditure. In our view the operation of the CESS is not transparently reflective of efficiency improvements or to distinguishing between efficient and inefficient deferrals. We therefore strongly support the AER's conclusion that there may need to be a review of the CESS guideline “to ensure that deferrals are adequately accounted for”’.
SACOSS has consistently raised the issue of savings from Information and Communications Technology (ICT) expenditure not being recognised in other parts of the expenditure proposal.  SACOSS notes the AER has accepted SAPN's revised ICT expenditure, but has highlighted that SAPN's forecast replacement capital expenditure does not fully reflect the benefits of their proposed Assets and Works IT project.

Ross Womersley stated: ‘SACOSS is pleased that the AER has recognised in their allowance for capital expenditure that the stated benefits of any ICT expenditure must be reflected by appropriate savings in other components of SAPN's forecast.’ 
Overall, SACOSS commends SAPN on its engagement process over the past two years,

Ross Womersley said: ‘SA Power Networks has been open and responsive in its  customer engagement during this lengthy process, this has been a welcome change from previous regulatory periods and we look forward to building on this relationship to further ensure vulnerable South Australian energy consumers pay no more than necessary for safe and reliable electricity.’

Published Date: 
Friday, 5 June 2020