Essential Energy says a federal court decision handed down on Wednesday is unlikely to affect current network charges for the remaining two financial years of the current 2014-19 regulatory period.
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The court dismissed the majority of the Australian Energy Regulator’s application for judicial review of last year’s decision by the Australian Competition Tribunal to set aside the AER’s 2014-19 determination for the network provider.
Wednesday’s decision will likely result in the ACT directing the AER to remake the operating cost, debt and any inter-related elements of its revenue determination for Essential Energy’s 2014-19 regulatory period.
The court upheld the AER’s application for judicial review regarding imputation credits (Gamma).
Essential Energy CEO John Cleland says the provider is critically aware of the potential impact this decision could have on regional and rural communities.
“We will continue to work closely with stakeholders as we reform the business to keep downward pressure on real network charges for customers,” he said.
Greens NSW energy spokesperson Jeremy Buckingham says the federal court ruling blocks government efforts to limit power price rises.
“It is a disaster for consumers and another failure of neo-liberal ideology,” he said.
“This court decision is a disaster for consumers who are already facing price rises for electricity and gas through gross mismanagement by government and systemic market failure,” Mr Buckingham said.
“Privatising and deregulating our energy system at a time of great change has been irresponsible and has led to the gouging of consumers, as the pursuit of profit from these essential services is put before the public interest.
We will continue to work closely with stakeholders as we reform the business to keep downward pressure on real network charges for customers.
- Essential Energy CEO John Cleland
“Gold plating and price gauging was bad enough when these entities were government corporations but with the privatisation and deregulation of these monopoly services we now have an increased incentive for rent seeking and weakened government control.”
Member for Port Macquarie Leslie Williams said network costs in NSW are guaranteed by law to be lower in 2019 than 2014.
“This price guarantee sought by our government is legally binding and importantly it means that consumers are protected,” she said.
“We reject speculation that bills will increase as a result of the federal court decision, and the figures cited are wrong.
“Essential Energy have confirmed the federal court decision is unlikely to have any impact on their network costs in the next two years of the current regulatory period (2014-19).”UPDATE:
Mr Cleland said the the energy provider’s long-term objective has always been to transition to a more streamlined, cost-effective business model that continues to deliver a safe, reliable and efficient electricity network for our customers.
“Essential Energy will continue to work collaboratively and cooperatively with the AER, our customers and other stakeholders to ensure the determination is re-made in the most efficient timeframe possible to provide clarity for our customers.
The federal court decision comes more than two years after the AER issued Essential Energy’s 2014-19 regulatory determination on April 30, 2015, reducing operating expenditure by 30 per cent, revenue by 25 per cent and capital expenditure by seven per cent with retrospective effect from July 1, 2014.
Essential Energy appealed the AER’s benchmarking methodology for operational expenditure and elements of the weighted average cost of capital (WACC) calculations.
After a merits review hearing in late 2015, the ACT set aside the AER’s 2014-19 regulatory determinations on 26 February 2016. The AER subsequently applied to the Federal Court for a judicial review of the Tribunal’s decision.
Essential Energy remains committed to delivering real network price reductions over time while continuing to improve business efficiency and productivity, Mr Cleland said.
“We’ve been reforming the business in a sustainable way for several years while maintaining safety and reliability, with the objective of operating at best industry practice, achieving real reductions in network charges and providing a satisfactory return for our owners, and we will continue on that path.”