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Cheaper power, but not much cheaper

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Electricity customers in South Australia will save around $100 on their power bills, after the national energy regulator today made its final price determination for the period to 2020.

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In a decision handed down this morning, the Australian Energy Regulator said SA Power Networks customers should save around $203 in the current financial year, but that would be offset by price increases in future years.

“Over the five years, this represents an average saving of 5 per cent or $101,” the regulator said in a statement.

The average residential customer will pay around $1905 in 2019-20, compared to $2007 in 2014-15.

The expected final savings are less than expected in the preliminary decision handed down in May, “primarily due to a revised and more accurate approach to depreciation, and changes in underlying interest rates impacting the cost of capital”.

AER chair Paula Conboy said: “Our goal in regulating the networks is to create incentives for these monopoly businesses to spend efficiently and to share the benefits of efficiency gains with consumers over time.”

She said SA Power Networks, which contributes around 38 per cent of an average SA household’s electricity bill, was “a relatively efficient distributor” but noted it had proposed “significant increases in expenditure compared to the 2010-15 period to undertake additional activities, which would have meant higher prices for consumers”.

“We do not consider that this additional expenditure is efficient nor justified, so these additional expenditures have not been accepted,” she said.

SA Power Networks spokesman Paul Roberts said the distributor “welcomed the Regulator’s acknowledgement of our efficiency”.

“However, the Regulator once again has rejected proposals that evolved from our significant consultation with customers,” he said.

“Things like improved vegetation management outcomes and aspects of bushfire safety, which were proposed on the basis of customer consultation, now will require further consideration.”

Energy Minister Tom Koutsantonis said the Government had “advocated strongly for the regulator to identify any opportunities for real decreases in electricity prices”.

“We acknowledge the independent regulator has to balance the needs of SA Power Networks being able to deliver a safe and reliable service, with opportunities to provide power bill relief to SA households,” he said.

But Business SA said residents and businesses would be collectively liable for $626 million more over the next five years than under the draft determination six months ago.

Director of Policy Rick Cairney said there had been a “major hike” in wholesale energy prices for businesses over the past four months.

“Some businesses have faced a doubling of wholesale prices of their electricity at a time when trading conditions are already very tough,” he said.

“South Australia has some of the highest power prices in the country, a situation exacerbated by the pending closure of Alinta Energy’s power station at Port Augusta, and constraints on the interconnector with Victoria.

“With power costs being a major business input, which impact on profitability and economic activity, the State and Federal Governments must collaborate to resolve the current price spikes caused by a lack of base load power generation.”

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