CCIQ says money grab by Ergon Energy is overly excessive
The Chamber of Commerce and Industry Queensland (CCIQ) says Ergon Energy’s bid for more money is “excessive” and will only put electricity prices up.
CCIQ has provided a submission to the Australian Energy Regulator (AER) in response to Ergon Energy’s regulatory revenue proposal for 2015-2020.
Every five years the electricity network distributors apply to the AER for their allowed revenue over that period. Ergon Energy’s proposal said there would be some price stability for consumers over the next five years – however CCIQ believed there were significant savings to be made on small business electricity bills.
The revenue approved by the AER is passed directly on to consumers, with the more revenue recovered, the higher the costs for consumers.
CCIQ General Manager of Advocacy Nick Behrens said Queensland small businesses had seen unsustainable increases in electricity prices in recent years.
“The AER revenue determination process is particularly pertinent, as the network cost component makes up more than half of the average electricity bill. Therefore, in order for small businesses to see real cost savings, the network charges must be drastically reduced,” he said.
Ergon Energy proposed reductions in its capital expenditure (capex) and operational expenditure (opex) from the previous regulatory period, but a higher weighted average cost of capital (WACC) than recommended benchmarks.
Ergon Energy is seeking a total of $7.6 billion in total revenue (up from $7.1 billion in the previous period).
“CCIQ finds these costs excessive particularly given the massive overspend in the previous period on network upgrades,” Mr Behrens said.
CCIQ conducted a survey of 1100 small businesses in December 2014 which found increasing electricity prices the most significant business cost issue, with 65 per cent indicating a major or critical concern with the cost of energy.
“The practical result of this complex issue is that Queensland electricity consumers will be paying a higher electricity price than they otherwise should have to if Ergon Energy was to adopt comparable industry benchmarks,” Mr Behrens said.
Ergon Energy will also be passing on the costs of the Queensland Government’s solar bonus scheme costs to consumers through Feed in Tariff recoveries expected to total over $700 million over the five years.
“Small businesses in regional Queensland have experienced crippling electricity price increases over the past seven years due to a massive over investment in the network infrastructure,” he said.
“CCIQ’s submission focussed on bringing down the costs of capex, opex and the WACC. The submission also addressed issues with Ergon Energy’s consumer engagement, the solar bonus scheme and incentive payments.”
The AER will make a draft determination by late April. The network distributors will then be able to submit a revised proposal and the AER will make a final determination by the end of October 2015.
CCIQ’s submission can be viewed on our website: https://www.cciq.com.au/advocacy/submissions/