Regulated electricity prices 2012–13

In November 2011 we released a draft methodology paper which outlined our proposed approaches to determining the key elements of regulated retail tariffs and prices. Our consultants, ACIL Tasman (ACIL), also released a report on their proposed approach to estimating energy costs.  We conducted workshops and invited submissions from stakeholders on the paper.

On 30 March 2012, we released the draft determination on regulated retail electricity prices for 2012-13.  The draft notified prices for 2012-13 reflected a number of general factors including:

• further increases in network charges
• an increase in the underlying cost of energy, primarily due to the carbon tax
• the one-off effects of moving from an ad hoc set of tariffs that had evolved over time to a new tariff structure reflecting the true costs of supply.

Unlike previous years under the BRCI where prices for all tariffs were increased by the same percentage, under the new arrangements different tariffs will be impacted differently. Moreover, the QCA was required to change the main residential tariff (tariff 11) from a flat tariff to an inclining block tariff. The impact of this change on households will vary according to their level of consumption.

The draft determination found the carbon tax would increase the typical residential household’s annual bill by around $192.35 (11.2%). In addition, the Commonwealth Enhanced Renewable Energy Target Scheme would add a further $92.80 (5.4%) to a typical residential household’s annual bill.

All documents relating to the draft methodology paper and draft determination can be downloaded below.

We released an issues paper inviting submissions from interested parties on the range of issues we must consider in this review, including in relation to network costs, energy costs, retail costs and the structure of tariffs.

We also released Energex’s proposed network tariff structure for 2012-13 for comment. As noted in the issues paper, these network tariffs are the basis upon which retail tariffs will be constructed.

We received 20 submissions in response to the issues paper and Energex’s proposed network tariff structure.

The issues paper, Energex’s proposed network tariff structure and submissions can be accessed below.

On 13 September 2011, the Electricity Act 1994 (the Electricity Act) was amended to replace the previous Benchmark Retail Cost Index approach to adjusting regulated retail electricity prices with a new price determination process.

The new price determination process is based on a network (N) plus retail (R) cost build-up approach, where network costs are treated as a pass-through and retail costs are determined by the QCA.

Under the 2011 delegation, we were required to publish:

• a draft methodology paper no later than December 2011
• a draft price determination on 30 March 2012
• a final price determination and gazette the retail tariffs no later than 31 May 2012.

On 25 November 2011, we conducted a public workshop to discuss our draft methodology paper and the draft methodology report prepared by ACIL Tasman. The workshop was attended by 36 stakeholders representing a range of organisations. Information and presentations from the workshop can be accessed below.

On 8 May 2012, the Minister provided the QCA with an amended delegation (2012 delegation). The 2012 delegation is consistent with the 2011 delegation, except for the removal of the requirement for the QCA to set prices for the residential general supply tariff (tariff 11). The Minister’s covering letter and amended delegation can be accessed below.

We also received a direction from the Minister under section 253AA of the Electricity Act to advise on the price that would have applied to a flat tariff 11 under the QCA’s N + R approach in 2012-13 and to identify the impact of the carbon tax on tariffs 11, 31 and 33.  We provided this advice on 5 June 2012.