Two changes affecting Electricity Cost in Queensland

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Queensland Electricity regulations changed in September 2014

In a move to harmonize Queensland Electricity regulation with the National system, a number of changes are in the wings. Currently Queensland’s electricity prices are regulated under the Electricity Act 1994 (Qld)  and are set by price determinations made by the Queensland Competition Authority. However in September of 2014 the Electricity Competition and Protection Legislation Amendment Act 2014 (Qld) and the National Energy Retail Law (Queensland) Act 2014 (Qld) were passed, and are to become effective from a date yet to be set by proclamation – expected to be 1 July 2015.

This legislation will change the way the retail electricity market works in Queensland in 3 major ways take affect Residential and small business customer electricity cost particularly:

  1. Removes retail price regulation
  2. Establishes a retail market monitoring scheme
  3. Aligns terminology with the National regulations and removes duplication’s.

This also brings in to play the National Energy Customer Framework, which will regulate the sale and supply of energy to consumers in Queensland.  The Framework is a set of national laws, rules and regulations that will govern the sale and supply of energy to residential and small business energy customers.  The Framework brings the whole energy supply chain (wholesale markets, transmission networks, distribution networks and retail markets) under national regulation and will have major impacts for businesses on-selling or sub-billing residential or business tenants for electricity consumption.

Australian Energy Regulator released it’s Preliminary decision setting revenue limits for Energex

The Australian Energy Regulator sets the maximum total revenue that Electricity Distributors are able to recover from it’s customers for the duration of each 5 year regulatory period. Each distributor provides a proposal to the AER for how much revenue they believe they should be allowed to collect and why. A number of electricity distributors have been rebutted by the AER with significantly lower allowances than their proposal. The preliminary decision on Energex has also rejected significant parts of Energex’s proposal.

Firstly they have rejected the projected cost of capital that Energex has used to model it’s project investment total costs. In this regard the AER expects that finance costs should be much lower than that proposed by Energex due to changes in the macro economy since the start of the last period. Given the events of the last 5 years this seems to be a rational position to take.

Secondly the AER has rejected the forecast capital requirement put forward without detailed justification.

The Preliminary decision allows Energex to recover $6,528 Million over the 5 years 2015 to 2020 compared with $8,432.4 Million proposed by Energex. If the preliminary decision stands this will result in lower electricity cost over the next five years in Queensland.