Flawed ‘Super Profits’ claims are misleading
Energy Networks Australia CEO Dominique van den Berg has rejected claims made in an Institute for Energy Economics and Financial Analysis (IEEFA) sponsored report that networks have earnt ‘super-profits’.
Ms van den Berg said:
“Transparency on the performance of networks is good for the community, but claims have to be based in facts – and the flawed analysis presented in this report falls short in this regard.
“The report repeats many of the same errors highlighted in earlier version of the same analysis last year.
“Customers benefit under incentive-based regulation because networks are rewarded for delivering the same services for less, or by delivering more value through enhanced reliability. Consumers receive around 70 to 80 per cent of the benefits of these gains, passed on through lower prices and higher service levels into the future.
“Australian energy consumers have already locked in benefits of over $13.4 billion – the equivalent of more than $1200 per customer – through the operation of the incentive regulation since 2006.
“For the past two years Australian electricity customers on average have paid less in real terms for distribution network portion of the bill, than in any other year since 2010, while reliability has improved.
“By using a flawed methodology which counts every variation from regulator approved forecasts as potential ‘super-profits’, the IEEFA report fundamentally misses the core feature of incentive frameworks.
“This results in an incomplete picture of record of incentive regulation, a system which is a commonly applied approach globally. By contrast, profit-based ‘rate of return’ regulation has been shown to have led to poor price and service outcomes for consumers, leading to its abandonment across many developed economies.
“As the Australian Energy Regulator recently found in its review of the incentive framework, the actual outcome of applying incentive-based regulation has been significant ongoing benefits to customers.
“Energy networks are committed to making the investments to enhance reliability, integrate renewable energy sources and deliver the energy transition for the community.”