Reforms delivering lower electricity bills

Joint media release with Minister for Industry and Science Ian Macfarlane.

Thursday 30 April 2015:

Consumers will see reductions in electricity prices as a result of Australian Government-led reforms to the energy sector.

The Australian Energy Regulator (AER) today handed down price determinations about the amount network businesses can charge for ‘poles and wires’ over a five year period, which will see customers in New South Wales, Queensland, South Australia and the ACT pay less for electricity network services.

For a typical household or small business in NSW and the ACT that will equate to a 5-12 per cent reduction in their electricity bill under the AER’s final price determination – which comes into effect on July 1. This will mean savings of between $100 and $300 on a typical household bill for 2015-16.

Preliminary decisions for Queensland and South Australian customers also show reductions in network prices meaning households and businesses in these States can also expect lower electricity prices from July 1 this year.

South Australian households will see reductions of around $200 in 2015-16, while Queensland households will see a smaller reduction of around $34 because of the need to recover the cost of subsidies for the state-based solar bonus scheme.

Minister for Industry and Science Ian Macfarlane said the AER’s decisions showed reforms undertaken by the COAG Energy Council are working.

“The Australian Government is delivering a range of energy market reforms to ease the pressure on household and business electricity bills,” Mr Macfarlane said.

“Under arrangements established by the COAG Energy Council, chaired by the Commonwealth, there are new rules for the Australian Energy Regulator so it has the power to ensure that network businesses are only charging customers for necessary and efficient costs.

“The AER approves how much network businesses can earn during a five year period and therefore, how much customers can be charged for the network component of their bills. Network prices make up around 50 per cent of electricity bills so they are a key factor influencing overall prices.

“The reforms have strengthened the AER’s ability to question network businesses’ proposals, including the introduction of expenditure benchmarking and setting a reasonable rate of return on investment.

“They have also expanded opportunities for consumers to participate in the process.”

Mr Macfarlane committed to continue working with States and Territories through the COAG Energy Council on a range of reforms to promote efficiency and competition, and put downward pressure on electricity bills.

“We will continue to push electricity networks to become more efficient across all States,” Mr Macfarlane said.

“The recently released Australian Government Energy White Paper outlines work underway that will drive competition and innovation to deliver energy products and services at the lowest cost, and give consumers more choice about where they get their energy and how they use it.

“These reforms will enhance incentives to manage consumer demand at peak times as an alternative to investing in expensive ‘poles and wires’. As well as new powers for the AER, Government-led reforms also ensure that in assessing any appeal of the AER’s decision, the long-term interests of consumers must be the most important consideration.

“The AER’s thorough assessment of the electricity network is delivering positive outcomes for consumers.”

Minister for Small Business Bruce Billson welcomed the decision and said it comes off the back off ACCC confirmation that carbon tax repeal savings have been passed through to energy consumers.

“Last year customers and businesses saw the first decrease to electricity bills in the last decade following the carbon tax repeal,” he said.

“The ACCC’s March quarterly carbon report released yesterday re-confirmed that the legislation is working and households and businesses are saving money.

“Today, the AER’s decision shows that customers will also now see significant reductions in their network costs and our Energy White Paper will ensure the market keeps driving down costs.

“The Abbott Government is committed to ensuring that Australia is the best place to start and grow a business, and these cost saving reforms are contributing.”

Final distribution network determinations for Victoria are due in April 2016 and for Tasmania in April 2017.