On 18 November, the Essential Services Commission (ESC) published its draft decision, part of the current review of guaranteed service levels for Victorian electricity distribution network service providers.
Guaranteed Service Level (GSL) payments are made to customers when agreed service levels are not met. These service levels include standards for the frequency and duration of supply interruptions.
The most significant changes proposed by the ESC are to reduce the level at which a GSL payment is made for the number of interruptions experienced in a year and to increase the nominal value of GSL payments that are made. The proposed increase in the value of GSL payments ensures that the real value of the GSL payments is maintained, and reflects the latest information available on the value that customers place on reliability.
Interested parties were to submit comments by 4 December 2015 and the ESC expects to release its final decision at the end of December 2015.
The new GSL standards and charges will apply from 2016.
The service incentive regime comprises two parts:
- A service incentive factor provides an incentive to maintain average service levels, and is regulated by the Australian Energy Regulator (AER).
- A Guaranteed Service Level or GSL payments scheme provides payments directly to the worst served customers (in the case of reliability) or where certain levels of service are not met.
The service incentive factor and the GSL payments scheme both provide an incentive for the electricity distributors to improve reliability. The service incentive factor encourages them to identify the least cost actions that will improve the average level of reliability. However, reliability improvements for the worst served customers may not be prioritised under the service incentive factor. This may be because there are few customers on the feeder and so any actions to improve reliability have an immaterial impact on the average reliability. Or there may be characteristics associated with that feeder which require relatively high cost actions to improve reliability. Therefore, the GSL payments scheme provides an additional incentive for electricity distributors to improve the reliability for the worst served customers.
The AER is currently determining the revenue that may be earned by the Victorian electricity distributors for the 2016-20 regulatory control period. In making a revenue determination, the AER must:
- determine the operating expenditure that is forecast to be incurred during the regulatory control period; and
- consider the trade off between service level requirements and expenditure.
Therefore, the AER needs clarity on the GSL payments scheme that is to apply during the next regulatory control period, so that it can forecast the operating expenditure required by the electricity distributors.
The Preliminary Determinations (just released) are based on the current Victorian GSL payments scheme. As any changes to the Victorian GSL payments scheme will take effect from 1 January 2016, the AER’s final determination that will be made by the end of April 2016 will consider the impact of any changes to the Victorian GSL payments scheme, with any adjustment required to the electricity distributors revenues made over the 2017-20 period.