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    The document is an opening statement to a Senate inquiry into the performance and management of electricity network companies. It makes three key points: 1) Historically, the regulatory regime for electricity networks has prioritized industry interests over consumer interests, leading to over-investment in networks and rising consumer bills. 2) While Victorian networks have been more efficient, they have still sought higher returns than efficient through regulatory appeals and obtaining approval for excess expenditures passed on to consumers. 3) The regulatory bodies could better represent consumers by having consumer advocates among their members, and preventing networks from disproportionately increasing fixed charges, which impact low-usage households the most.

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    The document is an opening statement to a Senate inquiry into the performance and management of electricity network companies. It makes three key points: 1) Historically, the regulatory regime for electricity networks has prioritized industry interests over consumer interests, leading to over-investment in networks and rising consumer bills. 2) While Victorian networks have been more efficient, they have still sought higher returns than efficient through regulatory appeals and obtaining approval for excess expenditures passed on to consumers. 3) The regulatory bodies could better represent consumers by having consumer advocates among their members, and preventing networks from disproportionately increasing fixed charges, which impact low-usage households the most.

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    The document is an opening statement to a Senate inquiry into the performance and management of electricity network companies. It makes three key points: 1) Historically, the regulatory regime for electricity networks has prioritized industry interests over consumer interests, leading to over-investment in networks and rising consumer bills. 2) While Victorian networks have been more efficient, they have still sought higher returns than efficient through regulatory appeals and obtaining approval for excess expenditures passed on to consumers. 3) The regulatory bodies could better represent consumers by having consumer advocates among their members, and preventing networks from disproportionately increasing fixed charges, which impact low-usage households the most.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    29 views2 pages

    Untitled

    Uploaded by

    api-279436514
    The document is an opening statement to a Senate inquiry into the performance and management of electricity network companies. It makes three key points: 1) Historically, the regulatory regime for electricity networks has prioritized industry interests over consumer interests, leading to over-investment in networks and rising consumer bills. 2) While Victorian networks have been more efficient, they have still sought higher returns than efficient through regulatory appeals and obtaining approval for excess expenditures passed on to consumers. 3) The regulatory bodies could better represent consumers by having consumer advocates among their members, and preventing networks from disproportionately increasing fixed charges, which impact low-usage households the most.

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    Opening comment to Senate Inquiry into the performance and

    management of electricity network companies


    Gerard Brody and Janine Rayner, Consumer Action Law Centre

    Thank you for the opportunity to speak to this inquiry.


    Our submission provided a potted history of the national reform process which
    applied to the network regulation of electricity and gas. Our intention in
    providing this history was to demonstrate that at key points in the policy making
    and rule making, industry interests were placed ahead of consumer interests.
    This incorrect focus, we submit, has led to the current situation where there are
    allegations of inefficient or over-investment in networks, contributing to rising
    consumer bills.
    There is some evidence that the Victorian networks have been more efficient,
    and the network component of Victorian customer bills have not increased as
    much, compared to other states. For example, the network cost in Victoria is
    about a quarter of the bill compared to half in other states. However, this has not
    stopped the networks using the regulatory system to obtain returns that are
    higher than efficient the example of the Victorian networks appealing the
    Australian Energy Regulators determination for distribution pricing during 20112015 is case in point. Another is the regulators December 2014 decision to
    approve excess expenditure relating to the Victorian smart meter rollout to the
    tune of $111 million: this means that the cost of the rollout was this much higher
    than initially budgeted for, but consumers still pay the difference.
    As for-profit privately-run businesses, it is natural for these businesses to seek to
    maximise returns. The point is whether the regulatory regime is sufficient. One
    proposal put forward in our submission was to consider whether the separation
    of the Australian Energy Market Commission from the Australian Energy
    Regulator remains appropriate. We submit that one institution may better focus
    consumer accountability, and prevent buck passing.
    Another option is to have stronger consumer representation in the governance
    frameworks of these bodies. This is not a novel suggestion. Since the inception of
    the Australian Competition and Consumer Commission, the position of deputy
    chair has been filled by a person with extensive expertise in consumer affairs.
    The current Deputy Chair of the Australian Securities and Investments
    Commission is similarly qualified. We believe that there should be at least one
    member of the AER and commissioner of the AEMC that has strong credentials in
    consumer affairs, representation or advocacy. After all, the objective of these
    bodies is to promote the long term interests of consumers.
    Our submission also noted the changing role of networks, and particularly the
    role of new technology driving onsite generation and demand side management.
    We are concerned that the networks are allowed to respond to this by increasing
    the fixed proportion of the consumer bill, that is, the part of the bill that does not

    vary with usage. In December 2014, the Essential Services Commission reported
    that fixed charges have increased 60 per cent since 2009-10, while overall prices
    increased only 45 per centsuggesting greater reliance on fixed charges
    compared to usage charges. More recently, the Society of St Vincent de Paul
    found that supply charges increased significantly in some network areas in
    January 2015. For example, it found that Lumo energy customers on a time of
    use tariff in SP Ausnets network area pay a supply charge of $730 per annum,
    more than $2 per day. This is how much they pay before they consume anything.
    Increasing supply charges impact low-use households, including low-income
    pensioner households, those that are efficient, or those with solar panels. We are
    concerned this issue will become worse in coming years and we submit that it is
    not efficient for businesses to be able to charge such large fixed supply charges.
    Finally, wed like to conclude with a few comments about the current debate over
    the AERs use of benchmarking in the latest round of network determinations.
    The businesses are strongly critiquing AERs use of benchmarking, because it is
    making transparent their inefficiencies. As noted in our submission, we were
    supportive of 2012 reforms that allowed the AER greater ability to interrogate,
    review and amend expenditure proposals of network businesses. The use of
    benchmarking, to allow the regulator to compare the network business with a
    benchmark efficient business, was also supported by the Productivity
    Commission in its 2012 report into energy networks. We also note that the
    networks were involved closely in the AERs 2013 better regulation program
    which developed the AERs approach, so it defies logic for them now to be
    critiquing the analytical technique.
    Wed be happy to take your questions.

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