The Australian Energy Regulator (AER) conducts a compliance check annually to ensure that distributors comply with the distribution determination price controls and that the total revenue recovered from consumers is no more than required for a safe and reliable electricity supply. As a process, AER requires distributors to submit a pricing proposal each year for the next regulatory year. Distributors provide detailed information on network tariffs along with the eligibility criteria with respect to each network tariff.
We, at Empower, have performed a detailed analysis on network costs AER approved for distributors in Victoria which was effective from 1 January 2021. The new distribution charges will be valid for 6 months until 30 June 2020, as AER changes for the first time to review Victorian distributor rates on 1 July each financial year in line with other AER states.
The following table presents the average network price changes for various tariffs under respective distributors*.
For the first six months of 2021, when compared to the changes for half of 2021, the network component of the typical bill will drop by:1
- $110.38 for small businesses on the Ausnet Services network
- $140.35 for small businesses on the United Energy network.
- $158.30 for small businesses on the Jemena network.
- $90.77 for small businesses on the CitiPower network.
- $18.18 for small business on the Powercor network.
While the drivers for the reduction in distribution charges vary by respective networks, one of the main reasons for the lower charges is the lower revenue allowances for the distribution charges set by the AER as part of the related determination for the six month period.
The electricity invoice consists of several cost components including wholesale, network , environmental and retail. Hence, it is important to note that the estimated reduction in electricity cost is based on the changes in distribution cost only and that the retailers may repackage tariffs and other movements may be observed in other components.