Networks NSW to appeal AER determinations

Networks NSW has today announced that it intends to appeal some aspects of the Australian Energy Regulator’s (AER) determinations (made on 30 April 2015) on the revenues that these networks will be allowed to earn over the next few years.

The CEO of Networks NSW (which comprises Ausgrid, Essential Energy and Endeavour Energy) announced that it would appeal the AER’s decisions both regarding average annual cuts of $324m to operating expenditure and not to provide a workable transition plan to implement continuing efficiency improvements. Legal appeals will be lodged with the Australian Competition Tribunal today and with the Federal Court by 28 May.

One of the new tools that the AER used in order to justify significant reductions in operating expenditure allowances was benchmarking. Drawing on this approach, the AER concluded in its final decisions that the base year operating expenditures of Ausgrid and Essential Energy were inefficient and should be reduced by 24.0% and 26.4%, respectively. This represents a reduction in base year operating expenditure of $118 million for Ausgrid and $110 million for Essential Energy.

Other electricity networks have also been unhappy with the AER’s determinations. ActewAGL has already announced its decision to lodge legal appeals with the Federal Court and the Australian Competition Tribunal against the AER’s final decision.

Frontier (Australia) has advised Networks NSW on assessing the AER’s benchmarking analysis.

For more information, please contact m.okeeffe@frontier-economics.com or phone +61 3 9620 4488.

 

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