The Australian Energy Regulator (AER) has released its 2020 Electricity Network Performance Report, finding that consumers are getting a cheaper and more reliable electricity supply than they have previously.
The AER said the 2020 Electricity Network Performance Report is the first of what will be annual network performance reports for electricity networks.
The report outlines the AER’s analysis of key outcomes and trends in the operational and financial performance data collected from electricity network service providers (NSPs).
In its report, the AER found that network regulation is improving outcomes for consumers, particularly in regards to consumers getting a more reliable supply of electricity and paying less for this supply than they have previously.
The report also found that at the same time, NSPs continue to attract sufficient investment to fund efficient expenditure in their networks.
The AER said that in future years, it will build on this initial report to address emerging issues such as the ongoing changes in the way energy is produced and consumed, to assist in alleviating stakeholders’ concerns about serving consumers’ long term interests.
Key findings in the report include:
- In total, consumers are spending less on network services than they have done in previous years, largely driven by reductions in allowed rates of return.
- It is expected that the trend of declining returns will continue as many NSPs have their allowed returns reset in lower interest rate conditions.
- Total network expenditure is substantially down from its peak in 2012. There has been a minor increase in 2019 compared to 2017 and 2018.
- Network reliability has improved over recent years, both in terms of frequency and duration of network outages. However, there were on average longer and more frequent outages in 2019 compared to 2018.
- There has been a significant increase in the capacity of the electrical supply system since 2006. At the same time, peak demand has been growing at a slower rate. This has meant that utilisation of networks is lower than in 2006, although there has been a modest increase in utilisation in the past three years as network investment has slowed.
- Regulated NSPs have become less profitable in recent years, following reductions in allowed rates of return.
- Analysis of market evidence suggests that investors continue to view allowed returns as being at least sufficient to attract efficient investment.
Energy Networks Australia CEO, Andrew Dillon, said while the recognition of improved reliability and affordability was welcome, there were critical emerging issues networks were facing to support the transforming energy system that required a forward-looking view by the AER.
“The AER has endorsed networks for delivering more reliability and lower prices for customers,” Mr Dillon said.
“However, the report is based on historical data and misses emerging issues around investability.
“Complacency around investment in the system would be bad news for customers.
“Investment in our grid is required. Without transmission, there’s no transition and without smart investment in local grids we will see more households blocked from exporting their solar power.”
Mr Dillon said it was clear that recent AER decisions had effectively more than halved real regulatory returns to shareholders.
“Unrealistic inflation assumptions have also contributed to recent determinations that deliver, based on the AER’s own numbers, negative profit after tax.
“These are unsustainable outcomes which risk poor customer consequences due to a lack of strategic grid development in the years ahead.
“We look forward to working with the AER and customers to deliver a sustainable framework that ensures networks can continue to deliver the services customers want while keeping prices affordable.”
In forthcoming years the AER plans to prepare similar reports for the full regulated gas pipelines, when the relevant historical data is provided by the pipelines in late-2020.
