By: Energy & Street Lighting Coordinator, Travis Sydes...

Key happenings in electricity pricing and supply 

•    The Australian Energy Regulator (AER), the Federal Government regulatory body, will announce its draft decision on the revenue cap for Ergon Energy on 30 April 2015. The revenue cap determines the pricing for the poles and wires network for the next five years; the poles and wires network component contributes almost bang on 50% of the amount we pay on our power bill so this is potentially a significant saving or another unwelcome rise depending on how it rolls out. If the final decision follows the trend of the NSW and Tasmanian poles and wires networks, we could see the revenue for Ergon Energy & Energex wound back from the current guaranteed rate of return of 9.72 % to somewhere around 7 %. To put this into perspective, a 3 percent drop would reduce Ergon Energy's revenue cap by approximately $2.4 billion. A reduced revenue cap should flow through to reduced electricity prices, as the prices consumers pay is dependent on how much revenue Ergon Energy is allowed to earn.

•    So hopefully this translates directly into a reduction in our power bill but if someone needs to take a hit, who will it be? Potentially it could be residential, business and industry customers as the electricity network currently generates significant income ($713 million 2014-15 budget) for the Queensland Treasury. Regional Queenslanders currently pay the same electricity price as customers in South East Queensland (regional Queensland is part of a poles and wires network with customers spread over a wide geographic area which is more expensive to operate than the poles and wires in SE Queensland) due to the Uniform Tariff Policy (UTP) and the Community Service Obligation (CSO). It is possible that the UTP and CSO may be eroded or at least put at risk by a reduced revenue cap. Regional jobs losses throughout Ergon Energy as well as a range of FNQ industries could result as well as a reduction in the reliability of supply, i.e. number and length of power disruptions.

•    In the meantime the Queensland Government has confirmed the Queensland Productivity Commissions is a goer. In a recent press release it was identified first cab off the rank is electricity pricing. This timing is unfortunate timing given we expect to see the pricing for the next 5 years locked in by July 2015 (or October 2015 if the Qld Govt. challenges the Australian Energy Regulator's decision in the Federal Court). It was also identified that the deregulation of retail pricing (SE corner) passed by the previous government will be placed on hold for 12 months to allow the Commission due course to determine the ‘best outcomes for consumers’. Also on the table is the consideration of allowing new retailers into the regional electricity market, which although a little optimistic on the Queensland Government’s part, might at least take the sting out of the unnecessary 5% ‘headroom charge’ added to your current power price to make your sole provider, Ergon Energy, less attractive. 

Breaking news:  AER draft determination is 5.85%!  Read this fact sheet on this draft determination. 

Street lighting

Street lighting has taken something of a back seat while I get my head around the hoops and loops of electricity pricing policy and regulation but we will be getting back into this full steam once the AER’s determination is delivered. In the meantime here is an update from LGAQ’s bulletin board.

On 1 July 2014, the pass through of an initial 10 per cent of non-energy street lighting charges, known as Alternate Control Service (ACS) charges, for councils in the Ergon Energy distribution area commenced. The recovery of the remaining 90 per cent is subject to the development of a price path that will seek to recover these charges over time.

Following recent representations to the Hon. Mark Bailey MP, Minister for Main Roads, Road Safety and Ports, and Minister of Energy and Water Supply, the LGAQ has received correspondence from the Minister confirming that there will be no further pass through of ACS charges (that is, in addition to the 10 per cent already passed through) in 2015/16.
Instead the Minister has asked the Department of Energy and Water Supply and Ergon Energy to work with the LGAQ to determine arrangements for 2016/17 onwards. The LGAQ will continue presenting the case for a price path that limits the impact of these charges over time.