Electricity network prices for homes and businesses in Melbourne’s south eastern suburbs and the Mornington Peninsula will decrease by 10.5% 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, United Energy, today.
The draft proposal for the 2021-2025 regulatory period has been released for consultation and offers to reduce annual network charges by $44 to $344 for residential customers and by $117 to $1,022 for business customers in 2021. These prices are proposed to remain flat in real terms over the next four years, between 2022 and 2025.
As distribution prices decrease, United Energy is seeking $1.1 billion in capital expenditure including customer connection expenditure of $176 million. This is a 12 per cent increase from the previous regulatory period and will sustain the safety and reliability of the network while supporting an additional 75,000 customer connections, augmentation needed to enable solar PV and increased inspection and maintenance programs.
United Energy 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 reset period include:
- Replacement work of $390 million and in particular, $195 million on pole and line replacements for community safety and infrastructure reliability;
- $15 million on network improvements to accommodate more solar and battery storage installations;
- $20 million in ‘flexible grid’ technology to improve monitoring and controlling the network in real time; and
- Upgrades and augmentation works of $225 million including major works to zone substations in East Malvern, Doncaster, Keysborough and Mornington as population growth drives an anticipated 75,000 new household and business connections 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.”
United Energy is planning to further decrease operating expenditure by 10% from $792 million in the 2016-2020 regulatory period to $710 million in 2021-2025.
Annual productivity benchmarking by the AER has assessed United Energy to be the third lowest cost network in Australia and among the most efficient in the country. United Energy is one of Australia’s most reliable networks, with power available for more than 99.99 per cent of the year, equating to customers on average being without power for about 45 minutes 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 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, United Energy’s proposed investments, pricing plans and rate of return are approved by the AER every five years and this determines the revenue we are able to recover from our customers.
United Energy 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.