FNQROC Update - October 2014

As mentioned in last month's report, FNQROC along with a number of other key FNQ stakeholders were fortunate to secure a time with the Consumer Challenge Panel (CCP) of the Australian Energy Regulator (AER). This presentation was titled "Getting Ready! Potential issues for consumers Ergon Distribution Network Regulatory Proposal".

This was a very informative session with a member of the energy regulation sector explaining to us in plain English how the system works, and how we are best able to contribute to the regulatory process as customers.  This is the first time consumers have been able to hold energy providers to account and we must take advantage of this if we are to see changes to the continually escalating price of energy.  As such, the CCP have urged us to question as many parts of the regulatory submission as possible.

The following is a brief summary of the tips provided to us by the CCP:

• Ergon Energy is quite different to other service providers in that they have a higher percentage of High Voltage customers which affects how they structure their tariffs;

• Consumers are recommended to consider Ergon Energy's spend on the asset base and whether that is prudent or efficient;

• Ergon Energy's Regulated Asset Base per customer appears to be growing a lot faster than Energex and as customers we should be questioning this;

• The CCP encourages us to be mindful of Ergon Energy's demand forecast – service providers often try to claim that demand is increasing as justification for increasing prices.  By considering historical data we are able to identify that demand is actually dropping.  It's also recommended that councils question what energy providers are doing to curtail peak demand;

• By looking at historical data we need to question whether existing infrastructure is being utilized to its maximum potential.  Again this could be another excuse to increase revenue by service providers;

• Be mindful of the Weighted Average Cost of Capital – we should not be satisfied with any attempts for Ergon Energy to put forward a cost of debt greater than 7.31%.  Under the last regulatory period it sat at 8.98%, however this was heavily influenced by the Global Financial Crisis.

As has been mentioned in previous updates, the regulatory submission is due at the end of October.  We will then have an opportunity to review what Ergon Energy has put forward and critique their submission.  Below is a summary of key dates in relation to the energy regulation process.

• 31 October 2014 - Deadline for Ergon Energy to submit its regulatory proposal to the Australian Energy Regulator.

• 9 December 2014 - public forum - question Ergon Energy on its proposal and also the release of an issues paper.

• 31 January 2015 - Submissions on Ergon's regulatory proposal close.

• 30 April 2015 - Australian Energy Regulator publishes preliminary determination.

• May 2015 - Predetermination conference.

• 2 July 2015 - Submissions on revised regulatory proposals close.

• 31 October 2015 - Australian Energy Regulator publishes final determination.