Media release: Baillieu Government facing its first test on electricity bills after Victorian distributors appeal regulator’s decision to keep process low

Consumer Action Law Centre says Victorians urgently need their new Government to take up its legal right to defend the Australian Energy Regulator’s recent decision to keep electricity costs for Victorians low, after all five Victorian electricity distributors appealed to the Australian Competition Tribunal seeking higher prices.

All groups who participated in the AER’s consultations were notified late on Friday that the distribution businesses are seeking to challenge the AER and raise their prices higher than the AER has allowed for 2011-15, which could cost Victorian households much more than they should have to pay.

Nicole Rich, Consumer Action’s Director-Policy & Campaigns said that the AER’s final pricing determination must be upheld to protect households from huge price increases but it was unclear if her organisation or community groups would have the resources to seek the court’s permission to intervene and take on a full court fight with the large businesses.  She urged the Government to use its automatic right to intervene under the law.

‘The Australian Energy Regulator decision would see consumers bearing a relatively modest increase for the poles and wires component of their bills that would average out to around $12 per year from 2012 to 2015. By contrast, the distributors are seeking a price increase of around 14%.’

‘Distribution costs account for around 40% of the total cost of household electricity bills and this appeal by distributors is another attempt by them to squeeze  every penny they can from Victorian consumers.’

Ms Rich said the distributors were appealing on a number of issues including the amounts they were allocated for future operating and capital expenditure, but past experience had shown these highly profitable businesses often provided forecasts to the regulator that far exceeded their actual expenditure, with consumers ending up paying much more than necessary.

‘Consumer Action research provided to the regulator showed that between 2001 and 2007, Victorian distributors asked the regulator to increase prices based on forecasts that exceeded actual spend by almost $600M. That meant each of Victoria’s 2.2 million electricity customers paid almost $270 more during that period than necessary.’

‘This appeal system isn’t fair to consumers because the distributors can pick and choose which bits of the regulator’s decision to appeal. Consumers get to have a say in the regulator’s decision, but are then effectively locked out of the Tribunal’s review of that decision because of the costs of taking court action.’

‘The regulator has tried to do the right thing by Victorian consumers by sending a clear message to distributors that their forecasts will face great scrutiny going forward,’ Ms Rich said.

‘Unfortunately, if the distributors succeed in this appeal, it will send a dangerous message and we’ll all end up paying even more for our energy at a time when many of us can least afford to. 71.5%between them, another sign that we could be doing more to help consumers switch.’

 

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