Australian competition tribunal rules in favour of electricity network operators in New South Wales who claimed their costs were $5bn more than estimated

Household energy prices are set to jump in New South Wales after a tribunal overturned a regulator’s decision to cut prices charged by electricity networks.

The decision also has national implications, and is likely to result in more expensive power bills in at least the ACT and Victoria.

In 2015 the Australian Energy Regulator ruled electricity network operators in NSW had overestimated their required expenditure, and so forced them to charge consumers less. That resulted in a drop in energy bills of between $100 and $300 a year.



Endeavour Energy, Essential Energy and Ausgrid challenged the decision, saying their costs were more than $5bn higher than the regulator estimated.

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The Public Interest Advocacy Centre, representing consumers, also appealed the decision, saying the regulator had overestimated the costs by more than $2bn.

In a federal court in Darwin, the Australian competition tribunal ruled in favour of the networks, but referred the case back to the regulator to determine the details. Since it accepted the network’s arguments that they should be able to charge more, the court did not address the advocacy centre’s appeal directly.

The decision, if implemented, will cause a sharp jump in people’s electricity bills, said Oliver Derum from the centre.

“The price cut will be removed,” he said. “All the money – between $150 and $300 per household that we’re enjoying at the moment – not only will that be reversed and probably in the end increase, but the money that they’ve under-recovered this year will be rolled in.”

Since the decision covers the period from 2014 to 2019, the networks’ changes will have a retrospective effect, meaning they will recover the money they missed out on after the price cuts were implemented.

Also, because the tribunal agreed with many of the network’s arguments about how to calculate the cost of efficiently running the network, prices are likely to jump by even more.

“Consumers will be very lucky to escape price rises that aren’t in the hundreds of dollars,” Derum said.

The 2015 price drop occurred partly as part of an attempt to stamp out the practice of “gold plating”, where owners and operators of electricity grids overinvested in infrastructure.

Operators of electricity grids have a monopoly so they could just recover the costs by passing them on to consumers. As a result, energy prices doubled in New South Wales since 2008.

In 2013 new federal laws were introduced that changed the way the regulator calculated how much the operators could charge customers, leading to the price drop.



“The law was changed in 2013 to give the regulator new powers to bring fairness to the electricity price-setting process, following price increases of 94% over five years. The tribunal’s decision makes it harder to bring about a fair result,” the advocacy centre’s chief executive, Edward Santow, said.

Because NSW was the first state to challenge the way the laws were implemented, operators from the ACT and Victoria also intervened in the case. The decision about how to estimate fair network costs will have implications in those states, too.

“The [Public Interest Advocacy Centre’s] appeal was the first time a consumer group has argued for a price decrease before the tribunal,” said Santow. “While the outcome is disappointing, [the centre] has paved the way for future successful consumer appeals, and we will be exploring all our options to continue to fight for fair energy prices for NSW consumers.”

Paula Conboy, chair of the Australian Energy Regulator, said: “We are considering the implications the tribunal’s decisions will have both for the revenue that the businesses will be allowed to recover from consumers in NSW and ACT, and the prices those consumers will have to pay, as well as our processes for future determinations.”