ActewAGL hits back against the energy regulator

actewagl house

ACTEWAGL have responded to the AER draft decision for the 2014-19 ACT electricity network determination, which was released in November 2014.

ActewAGL Chief Executive Officer Michael Costello said, “Since the draft decision is much more aggressive than anticipated, our response is a comprehensive and detailed document containing all the relevant technical contentions supported by extensive external reports on key issues such as the benchmarking.

“As I said when the draft decision was announced in November, the AER’s benchmarking has been used in a manner inconsistent with international best practice and cannot be relied upon. The data is immature and reported on an inconsistent basis between businesses.

“We have submitted compelling evidence from Australian and international experts which demonstrates that the economic benchmarking analysis is subject to numerous technical flaws which means that it does not produce a reliable and robust estimate of ActewAGL Distribution’s efficient base opex.

“Making massive reductions to opex on the basis of unreliable benchmarking results will have significant consequences for our staff and customers. It won’t allow us to operate and maintain our network to ensure we continue to deliver a highly reliable and safe electricity supply that’s in the long-term interests of consumers.

“The AER’s proposed opex allowance is the same as our opex was 15 years ago. We cannot fathom how the AER can expect the business to deliver reliable and secure electricity services when there has been a considerable increase in scale since then. ActewAGL Distribution is serving 40 per cent more customers and maintaining a 40 per cent higher asset base since 1999/2000.

“The AER is proposing cuts in our expenditure allowances of 42 per cent (a reduction of $160 million over five years). If the AER adopts its draft decision as final, the brazen and unjustified cuts in expenditure allowances without a suitable transition to a justifiable and realistic expenditure level would have negative impacts on service reliability and safety.

“The regulator fails to consider that the impact of reductions in expenditures which would produce lower electricity prices for consumers in the short-term, are likely to lead to higher costs over the long-term. This will repeat the ‘boom-bust’ cycle observed in the past.

“In the process of responding to the AER’s contentions, we have also reviewed the need for, scope and timing of our major augmentation projects and identified that the Molonglo zone substation can efficiently and prudently be delayed by one year. We also reviewed the need for augmentation at the Belconnen zone substation on the basis of revised demand forecasts and concluded that this project can be deferred beyond this regulatory period.

“ActewAGL’s residential consumers currently pay the lowest network charges in the country (on a state by state comparison) and have the lowest electricity bill.

“Although we continue to reject the AER draft decision, we have responded constructively through the regulatory process and will continue to do so.”

Interested parties can submit a response to the AER’s draft decision and ActewAGL’s response by 13 February 2015.

ActewAGL have produced a fact sheet and for a copy of their full response visit actewagl.com.au/aer

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