Overinvestment in NSW poles and wires continues at consumers’ expense

The Australian Energy Regulator (AER) will allow the NSW electricity networks to invest an additional $7 billion in capital works over the next five years, keeping electricity prices unnecessarily high, according to the Public Interest Advocacy Centre (PIAC). The AER today released its 2014-2019 revenue determination for the NSW network businesses.

‘NSW consumers pay too much for electricity because electricity networks have been allowed to spend too much on the poles and wires. The AER has missed an opportunity to rein in this excessive capital expenditure, and associated borrowing costs, by Ausgrid, Endeavour Energy and Essential Energy,’ said Dr Gabrielle Kuiper, Senior Policy Officer in PIAC’s Energy + Water Consumer Advocacy Program.

‘While the AER’s decision will lead to a reduction in electricity prices for consumers, they will still be significantly higher than they need to be. This is because the AER has allowed increases in both capital expenditure and operating expenditure above its draft determination.’

‘Consumers are using less electricity, interest rates are at historical lows and there has been massive over-investment in the electricity networks. The proposals by NSW network businesses for infrastructure expenditure and rate of return do not give due weight to these facts,’ said Dr Kuiper. 

‘Infrastructure and borrowing costs must be kept in check because electricity consumers pay for these costs in their power bills.’

‘The NSW network businesses claimed that the efficient cost of debt for an electricity network is 7.98%. While the AER has reduced the cost of debt to 6.4%, it is still excessive.’ 

‘By comparison, the AER’s draft determination for the South Australian networks (also released today) determined debt financing costs at 4.35%. Why should NSW consumers pay so much more?’ said asked Dr Kuiper.

‘Network prices in NSW are now double those of Victoria. In other words, it costs twice as much to get electricity from a power station in NSW to a household, as compared with Victoria. This is bad news both for the NSW economy and for the 33,000 households who were disconnected from electricity for non-payment last year,’ said Dr Kuiper.

MEDIA CONTACT: PIAC Senior Media Officer, Gemma Pearce 0478 739 280.

Photo: Flickr/Niclazo

Pin It on Pinterest