By Jonathan Pavetto, Consultant - SAS Group
Queensland businesses are running out of time to intervene in a once in a five-year regulatory process. If your business has high electricity costs, you need to know about the Australian Energy Regulator (AER) and its Regulatory Reset for Ergon Energy and Energex. If you don’t want your electricity bills increasing over the next five years, you need to be involved in this process.
Recently, the AER released its Preliminary Determination for Ergon Energy and Energex and it is only recommending very minor cuts to Ergon Energy and Energex’s current revenues. Modeling the impact of the Preliminary decisions shows us two things – the AER’s cut to Ergon Energy and Energex’s revenues will not reduce network prices over the next five years, and electricity consumers are set for massive future price increases if Ergon Energy and Energex’s demand forecasts are incorrect.
Engaging with the AER and the Queensland Government is critically important. Without targeted and strategic engagement:
- THE AUSTRALIAN ENERGY REGULATOR will assume its Preliminary Decision is acceptable to electricity consumers and its Final Decision will lock-in higher prices for the next five years.
- THE QUEENSLAND GOVERNMENT won’t intervene on behalf of consumers and may even encourage Ergon to take the AER to the Federal Court, seeking even larger revenues, leading to higher prices – similar to what is about to occur in NSW. This happened at Ergon’s previous AER Reset in 2010; and
- ELECTRICITY CONSUMERS will be stuck with higher prices. Marginal industries will become unviable and the electricity sector will be sent into a pricing ‘death spiral’.
The process is not yet finished. There is a final opportunity to influence the process and achieve substantial price reductions, through lower allowed operational expenditure and finance costs, to the benefit of electricity consumers.
Lobbying the AER and the Queensland Government to ensure consumers pay only efficient prices will mean substantial price reductions. For example, if Ergon Energy and Energex could charge for their efficient costs only:
- Industrial consumers could save pay up to $350,581 less per year and be $1,753,000 better off by 2020.
- Small business could save up to $1,475 less per year and be $7,375 better off by 2020.
- Residential could save up to $400 less per year and be $2,016 better off by 2020.
These reductions will not be achieved without a comprehensive government relations, media and communications campaign from electricity consumers. For more information about how you can be involved in this type of campaign, don’t hesitate to contact us today.