31st May 2017
Australian consumers already suffering from some of the highest electricity prices in the developed world are facing even higher bills after a group of NSW network operators won a Federal Court challenge against the national energy regulator over the amount they can charge for power.
In a bitter battle that started more than two years ago with the Australian Competition Tribunal, three NSW electricity distribution firms – Ausgrid, Endeavour Energy and Essential Energy – sought to overturn price cuts of about 20 per cent imposed by the Australian Energy Regulator in its April 30 pricing determination.
The unprecedented step would see the networks – including the NSW government owned assets, Ausgrid and Endeavour – spend millions on legal fees fighting the AER’s efforts to rein in their costs.
The AER – which was, rather ironically, also facing a legal challenge from the Public Interest Advocacy Centre, which had argued the AER’s suggested revenue cuts weren’t deep enough – has previously come under fire for allowing too much spending by the networks.
Indeed, as we reported at the time, the AER’s April 30 decision was more lenient than its initial determination of November 2014, when it fairly slapped down the NSW grid operators’ bid to boost spending by as much as 50 per cent.
Now, the regulator’s efforts to rein in spending by the networks, and by association any further rises in electricity prices, have not been supported by the Federal Court.
In particular, the AER has lost the battle over how much the networks could spend on operating costs and the cost of debt.
The decision is likely to have huge consequences for consumer in NSW and across the country, even though the government is considering changing the rules on the networks’ avenue of appeal in the future.
“This decision is disappointing for NSW and ACT electricity and gas customers overall,” said AER chair Paula Conboy in a statement on Wednesday, noting that the decision might also have implications for customers in other states.
“Our 2015 decisions set lower revenues than proposed by the network businesses in NSW and ACT, partly because we concluded that costs above efficient levels should be funded by the network owners, not customers,” she said.
Conboy said the AER would now carefully consider the judgement, as well as the next steps and any implications for these and other network revenue determinations.