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The Australian Energy Regulator (AER) has handed down 2020-25 revenue decisions for Jemena Gas Network, Ergon Energy, Energex and SA Power Networks (SAPN).

Jemena Gas Network (JGN)

The AER’s decision allows JGN $2.176 billion in revenue over the 2020–25 period, starting 1 July 2020.

The AER said this was good news for NSW consumers concerned about affordability, with gas bills likely to fall for almost 1.4 million homes and businesses to which JGN distributes gas.

AER Chair, Clare Savage, said JGN’s high quality approach to consumer engagement put bill payers’ priorities at the centre of the decision.

“JGN’s meaningful engagement on its proposal, founded on multiple consumer forums held in coastal and regional NSW, meant that we knew JGN was ‘walking the walk’ and not just ‘talking the talk’ with its consumers,” Ms Savage said.

“Energy affordability came out as a key priority for JGN’s gas consumers. To its credit, JGN has in turn responded to those concerns by putting forward a proposal that puts downward pressure on gas network charges and consumers’ bills in the 2020-25 period.”

From 1 July 2020, compared to current levels, average annual retail gas bills for residential consumers are expected to drop by $55 (8.3 per cent) in coastal areas and $81 (6.8 per cent) in regional areas, and $289 (6.0 per cent) for small business consumers. There will be modest increases for the remainder of the five year period.

JGN’s share of the retail gas bill for a typical residential consumer in its distribution network area is around 41 per cent in coastal areas and 33 per cent in regional areas.

The AER’s decision accepts JGN’s proposed operating expenditure and the majority of its proposed capital spending on the basis of improved supporting information.

The return on capital represents the area of greatest difference in dollar terms between what JGN proposed and what the AER accepted, largely due to downward movements in the rate of return in the period between JGN lodging its proposal and the AER making its decision.

“We have largely accepted what JGN has proposed because its engagement process demonstrated to us that the long term interests of consumers is at the heart of what it is doing,” said Ms Savage.

But Ms Savage said the AER’s decision refused JGN’s proposal to accelerate depreciation of its gas network, as there is currently insufficient evidence the network will not be viable post‑2050.

Ergon Energy

The AER’s decision allows Ergon Energy to recover $5.926 billion in revenue over the 2020-25 regulatory control period.

AER Deputy Chair, Jim Cox, said the decision will provide benefits to consumers while ensuring Ergon Energy has sufficient revenue to provide safe and reliable electricity.

“Consumers should pay no more than necessary for safe and reliable electricity. Ergon Energy now has the funds required to upgrade and maintain the network while meeting its regulatory and safety obligations,” Mr Cox said.

The AER did not agree to all of Ergon Energy’s proposed spending. The final decision includes $891.8 million for Ergon Energy’s replacement capital expenditure program. This is substantially less than the amount proposed by Ergon Energy.

“We have provided sufficient revenue to enable Ergon Energy to meet key safety requirements such as ensuring power lines and structures are free of hazards. However, we consider that they can meet these requirements at lower than the expenditure they proposed,” Mr Cox said.

Ergon Energy network charges make up about 35 per cent of a standard residential retail bill and 28 per cent for small businesses.

As a result of this decision, network charges for residential consumers will drop by $73 (4.6 per cent) in the first year and then rise on average by $3 a year (0.2 per cent) for the remaining four years.

For small business consumers, network charges will drop by $82 (3.7 per cent) in the first year and then rise on average by $3 a year (0.1 per cent) for the remaining four years.

These estimates exclude amounts that will be passed on to customers under the Queensland Government’s solar bonus scheme. The solar bonus scheme is outside the AER’s determination, but will be included in the network’s annual pricing proposal.

Mr Cox said the decision also allows Ergon Energy to upgrade its low voltage network, but that businesses should be considering distributed energy resources as part of their future planning to support system integration and outcomes for consumers.

“Ergon Energy’s original proposal on distributed energy resources was not well supported, and our draft decision reflected this, but in their revised proposal, Ergon Energy provided better material to justify its proposed sending in this area,” he said.

“The decision allows Ergon Energy to invest in a management platform which will enable consumers to export energy to the grid without increasing voltage problems in the network.”

Energex

The AER’s decision allows Energex $6.01 billion in revenue over the 2020–25 regulatory control period.

Mr Cox said that a thorough and genuine process of consumer engagement helped to shape a decision that supports both networks and the community.

“We know that affordability is a major issue for Energex’s consumers. This decision balances those consumer concerns about affordability with the need for investment in the network,” Mr Cox said.

“We are pleased that Energex demonstrated its commitment to listening to those who pay the bills through its extensive engagement program, giving consumer groups the opportunity to influence its proposals.”

Energex network charges make up about 35 per cent of a standard residential retail bill and 28 per cent for small businesses.

As a result of this decision, network charges for residential consumers will drop by $73 (4.6 per cent) in the first year and then rise on average by $3 year (0.2 per cent) for the remaining four years.

For small business consumers, network charges will drop by $82 (3.7 per cent) in the first year and then rise on average by $3 a year (0.1 per cent) for the remaining four years.

This excludes the amount that may be passed on to customers under the Queensland Government’s Solar Bonus scheme. The solar bonus scheme is outside the AER’s decision but will be included in the network’s annual pricing proposal.

Mr Cox said that the decision also allows Energex to upgrade its low voltage network but that the business should be considering distributed energy resources as part of its future planning to support system integration and better outcomes for consumers.

SA Power Networks

The AER’s decision allows SA Power Networks (SAPN) $3.914 billion in revenue over the 2020–25 regulatory control period.

“We have largely supported what SAPN proposed to us because of their strong consumer engagement. Consumers were clear in their support for lower prices, increased spending to accommodate more solar PV and new tariff structures,” Ms Savage said.

As a result of this decision, distribution network charges for residential consumers will drop by $40 (2.1 per cent) in the first year and then remain steady for the remaining four years.

For small business consumers, distribution network charges will drop by $166 (1.8 per cent) in the first year and then also remain stable for the remainder of the period.

SAPN’s network charges make up about 30 per cent of a standard residential retail bill and 27 per cent for small businesses.

SAPN’s distribution area represents 99 per cent of South Australia’s population, supplying electricity to 860,000 businesses and homes, with a network of poles and wires spanning over 178,000km.

Ms Savage said the decision supports SAPN’s need to upgrade its operations to account for the impact the rapid uptake of rooftop solar is having on the network.

“Rooftop solar is now mainstream for South Australian households and businesses but that has an effect on the operation of the network. We’ve funded increased capability to help the network cope with this change,” Ms Savage said.

“We’ve also approved discounted daytime tariffs to encourage consumers to use power when the sun is shining. The decision will allow SAPN to come back to us for more funding if they need to further strengthen the network to cope with very low levels of grid demand during the day.” 

Ms Savage said SAPN had submitted a well-supported revised proposal, most of which the AER has accepted.

“There were some elements where we disagreed, like on the replacement of existing assets. We know SAPN can better target and prioritise spending here to deliver greater savings for consumers,” Ms Savage said.

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