AER draft decision: Electricity distribution prices for Tasmania

Access Arrangements & Price Determinations

Oct 03
AER draft decision: Electricity distribution prices for Tasmania

At the end of September 2016, the Australian Energy Regulator (AER) released its draft determination on electricity distribution network prices for Tasmania for 2017/18 and 201/19.

The draft determination reduces the revenue TasNetworks can recover through network charges by nearly 13% from the $511.9m proposed to $446.6m in the draft decision.  The AER has calculated that this converts to a reduction in the annual average residential electricity bill of $163.

Whilst the AER accepted TasNetwork’s operating and capital cost forecasts, it adjusted the rate of return from the 6.04% proposed to 5.48% to reflect:

  • changing market conditions and reduction in interest rates that reduce the estimates for the risk free rate and the return on debt; and
  • a lower gamma of 0.25 instead of the 0.4 proposed.

The AER also corrected an inconsistency in the calculation of operating cost savings under the Efficiency Benefit Sharing Scheme.  This reduced the operating cost carryover by 56% to $18.1m.

Interested parties have until 1 December to respond to the AER’s draft determination.  TasNetworks has until 1 December 2016 to submit an updated proposal and stakeholders have until 23 December 2016 to respond to the updated proposal.

The AER expects to publish its final decision on Tasmanian electricity distribution network prices in April 2017.

Note:

The two year regulatory period enables TasNetworks to align access arrangement timings for its transmission and distribution businesses going forward.