Network power prices to fall under Powercor's new proposal
Electricity network prices for homes and businesses in Victoria's west will decrease by 5.4% in 2021 while investment in the safety and flexibility of the power network will be boosted under a new draft proposal released by distribution business, Powercor, today.
The draft proposal for the 2021-2025 regulatory period has been released for consultation and offers to reduce annual network charges by $24 to $412 for residential customers and by $90 to $1,582 for business customers in 2021. These prices are proposed to remain flat in real terms over the four years from 2022 to 2025.
As network prices decrease, Powercor is seeking $2 billion in capital expenditure including customer connections expenditure of $400 million. This is a 2 per cent increase from the previous regulatory period and sustains the safety and reliability of the network while supporting an additional 110,000 customer connections, augmentation needed to enable solar PV and increased inspection and maintenance programs.
Powercor Chief Executive Officer Tim Rourke said the five-year proposal balanced the need to keep prices affordable with the network investment essential for accommodating customers' energy choices.
"Under this proposal it will cost less for our customers to get a better and safer service and to do what they want with electricity," Mr Rourke said.
"In particular, we want to help customers installing solar PV to get the most out of both their investment and the Victorian Government's subsidy."
The major individual projects proposed for the 2021-2025 regulatory period include:
· Replacement work of $644 million and in particular, $332 million on pole and line replacements for community safety and infrastructure reliability;
· $121 million connecting wind farms in Victoria's southern region and solar farms in the north;
· $90 million on network improvements to accommodate more solar and battery storage installations;
· $35 million in 'flexible grid' technology to improve monitoring and controlling the network in real time; and
· Augmentation works of $258 million including new zone substations in Torquay and Tarneit and upgrades to powerlines in the western growth areas expected to generate a 13% increase in customer numbers over the five years.
Mr Rourke said these investments were necessary to ensure network capacity did not curtail customers using solar PV.
"We are planning a dedicated program to enable greater solar PV connections and more renewable energy exports by installing smarter technology and assets to manage voltage flows on the network," he said.
Consultation with more than 5,000 stakeholders during the past two years had defined demand for a smart and flexible network, with solar PV installations expected to more than double by 2025.
"We have listened to what our customers want. Our proposal supports their decisions and continues to deliver the performance they expect from a smart network," Mr Rourke said.
"Importantly, it also passes on savings achieved through cost efficiencies over the past five years."
Powercor is seeking a 5% increase in operating expenditure from $1.3 billion in the previous 2016-2020 regulatory period to $1.4 billion in 2021-2025.
Annual productivity benchmarking by the Australian Energy Regulator (AER) has assessed Powercor to be the lowest cost rural network in Australia and one of the most efficient in the country. Powercor is Australia's most reliable rural network, with power available for more than 99.97 per cent of the year, equating to customers on average being without power for about 2.5 hours a year.
"Distribution charges make up approximately a quarter of average annual residential electricity costs and have declined over the past decade," Mr Rourke said.
"It means for about $1 per day, our customers get the benefit of our 2,000 people who build, operate and maintain the network of poles, wires and infrastructure to bring electricity to homes and businesses."
Other charges identified by the Australian Energy Market Commission's 2018 Residential Electricity Price Trends Review (December 2018) and which make up the price stack to customers include: transmission, metering, wholesale electricity generation, environmental levies and retailer charges.
As a regulated business, Powercor's proposed investments, pricing plans and rate of return are approved by the AER every five years and this determines the revenue able to be recovered from customers.
Powercor is now seeking customer feedback on its 2021-2025 Draft Proposal. This feedback will inform the final proposal due to the AER in July this year.
Customers have until 30 April 2019 to submit feedback to the draft proposal. It can be found at talkingelectricity.com.au
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Background – Powercor
Powercor distributes electricity to around 810,000 customers – or more than 1.75 million Victorians - across the western suburbs of Melbourne and through central and western Victoria to the South Australian and New South Wales borders. Electricity is distributed in the region via a network comprising over 85,000 kilometres of wires supported by more than 570,000 poles and associated infrastructure.
The network supports 2,900 commercial and industrial business, 104,000 small businesses, 70 per cent of the state's agricultural production and 25 per cent of Victoria's GDP.
Teams based in depots across the region are focused on staying on top of things to deliver reliable, safe and affordable electricity to households and businesses by operating, managing and maintaining all network assets and metering services. This means managing a network that is reliable and safe, particularly in relation to bushfire risks.
AER benchmarking rates Powercor as the lowest cost rural network for residential and small business customers across Australia. It is also the most efficient and the highest utilised network in the National Electricity Market.
