Electricity customers pay a distribution network charge for the cost of building, operating and maintaining the electricity distribution network. They also pay a charge for that covers the cost of a smart metering service to measure the amount of electricity being used. Together, these charges account for approximately 36% of a typical electricity bill in AusNet Services’ distribution area.
Every five years, the Australian Energy Regulator (AER) approves the electricity distribution network charges, including:
Since 2017, the five Victorian electricity distribution businesses - AusNet Services, CitiPower, Jemena, Powercor and United Energy - have been collaborating to explore the future of household network pricing. The Victorian electricity distributors’ pricing proposals for the 2021 – 25 regulatory period are currently due for submission to the Australian Energy Regulatory (AER) in July 2019. The outcomes from this joint engagement process will inform our regulatory proposals, but our engagement on pricing is about much more than just regulatory submissions. As previous attempts to consider the way electricity is priced has shown, this process can be slow and challenging, and needs a whole-of-sector approach. So we have made a deliberate decision to change the way we engaged on this topic and set out to adopt a much more collaborative approach, both between the Victorian distributors, and with customers and stakeholders. We have started the process through a series of pricing forums focused on electricity pricing for households and small to medium businesses. The breadth of participation to date, with representatives from consumer groups, retailers, state and federal governments, regulators, industry groups and associations, ensures that diverse perspectives are reflected in how we best deliver network pricing structures in the long-term interests of Victorian households.
At the initial forum, held on 1 November 2017, a significant majority of participants said that some kind of change to network pricing for Victorian households was either necessary or desirable, and in the interests of consumers. Stakeholders identified challenges and opportunities when it comes to household electricity pricing and its modernisation, and reforms to support the transition. Stakeholders also indicated their preferred criteria for evaluating the acceptability of a new pricing structure, including: simplicity; efficient and reflective; fairness, consistency and equity; affordability; and recognition of two-way energy flows.
Leading into the second forum, we commissioned a report by global consultants The Brattle Group, which articulated five objectives to guide the design of household network pricing (based on the criteria identified by participants in the initial forum) – simplicity, economic efficiency, adaptability, affordability and equity. This report provided an update on international developments in household network pricing and considered a range of pricing structures that best fit the guiding objectives.
In the second forum, on 18 April 2018, stakeholders arrived at a consensus that network tariff design should straddle both retailers and customers, being designed for the retailer with the customer in mind. This was reflected in discussions about potential pricing structures, where stakeholders indicated a preference for efficient and complex structures over simple but inefficient structures, but also familiar to less familiar pricing structures.
At the end of the second forum, the Victorian electricity distributors’ committed to developing a set of pricing options that met the guiding objectives for pricing design. In a consultation paper published in September 2018, we sought stakeholder feedback on a shortlist of potential pricing options, evaluating the strengths and weaknesses of each against the guiding objectives.
At the third forum, held on 20 March 2019, based on all the feedback heard to date, the Victorian electricity distributor’s presented our draft proposal for potential new household network pricing structure and our transition approach to best move a larger proportion of Victorian residential electricity customers to this more cost-reflective pricing structure. ACIL Allen also presented preliminary findings from their study on the customer bill impacts of moving to this new pricing structure, based on a sample of customers skewed strongly towards vulnerable group. Whilst there was support by participants for both the pricing structure and transition proposals, we recognise that further work is required to understand customer impacts, particularly for our most vulnerable customers. This includes targeted consultation with a range of stakeholders to address specific issues and concerns.
For more detailed information about the Victorian electricity distributors’ collaborative engagement process, see all relevant material below:
AusNet Services’ current five-year regulatory period for electricity distribution runs from 1 January 2016 to 31 December 2020. The approved revenue for this period is explained in the following documents:
Current tariffs are provided in the TSS and Annual Tariff Report here: