Submission to AER Values of Customer Reliability Methodology Draft Determination

PIAC made a submission on the Australian Energy Regulator’s (AER) proposed amendments to the Value of Customer Reliability (VCR) Methodology.

We argued that the methodology is not fit for purpose. It uses for its primary data a very short survey to glean insights into consumer’s preferences regarding trade-offs between energy reliability and costs. This requires respondents to engage with matters that are far more complex than even energy professionals could manage, let alone laypeople.

The VCR is very material. It is implemented at a number of places in the energy regulatory regime, investment and revenue approvals key among them. NSW households stand to lose billions of dollars as a result of an unnecessarily high VCR, or face more reliability events than they would choose to as a result of an unnecessarily low one. It is enormously important that the AER commits to a consultation and development process to produce a VCR methodology that is robust and can be trusted by stakeholder to produce a set of VCR values that meaningfully reflect the preferences of various energy consumers.