Towards a national approach to electricity network tariff reform

Analysis for Energy Network Australia shows that Australian households could save an average of up to $250 per year in electricity bills and avoid unfair cross-subsidies of up to $655 per year to customers investing in technology, if more efficient, cost-reflective network tariffs were fully reflected in the retail tariffs charged to customers.  

In reviewing different tariff options, analysis for Energy Networks Australia found that network tariffs based on customer peak demand would achieve the lowest network charges and cross-subsidies for residential customers.

The continued growth in rooftop solar installation is both an opportunity and a threat to fair prices for customers, with up to a further 7 million customers projected to instal solar panels by 2034. If these customers remain on current tariffs they will benefit from a cross-subsidy paid by all other network customers. This is despite these customers having metering technology permitting a cost-reflective network tariff to be offered to them with no additional investment by the customer.

Energy Networks Australia has advocated for a comprehensive, national approach to network tariff reform that provides for cost-reflective network tariffs for residential and small business customers and the fastest economic roll-out of enabling metering technology. Energy Networks Australia will continue to engage with stakeholders, in particular customers and retailers, and to work with the Council of Australian Governments (COAG) Energy Council to progress the reform agenda.

At its meeting on 11 December 2014, the COAG Energy Council announced the inclusion of network tariff reform as one of its five strategic priorities for the energy sector. The Council expressed its support for network tariff reform as essential to allow customers to make informed decisions about their electricity usage and to deliver better signals for efficient investment in network capacity and investment in technology by customers to manage their energy usage.

With changes to the distribution network pricing arrangements in the National Electricity Rules (NER) now in effect, the remaining barriers to fairer network prices need to be removed.

There is a need for a clear and enduring policy and regulatory environment that removes the risk of “ad hoc” jurisdictional requirements being imposed that are in conflict with the NER. The existing regulatory barriers should be removed and further regulatory constraints that have been proposed in a pending rule change should not be progressed.

Energy Networks Australia has proposed that a national approach could be progressed through the development of an Industry Standard for Network Tariff Reform. The Industry Standard could support tariff development, co-operative approaches for retailer pass through of network tariffs, assistance to vulnerable customers during the transition to cost-reflective network tariffs, and the development of information and decision making tools for customers.

The foundation policies proposed by Energy Network Australia address the critical prerequisites for the widespread achievement of network tariff reforms. These are the economic deployment of more advanced meters in jurisdictions outside of Victoria; and the ability of networks to mandatorily assign customers to cost-reflective network tariffs which may transition customers to ensure fairer outcomes for all customers.

While these policies provide an important context for fair and efficient network tariffs, network businesses will consult with their customers on network tariff proposals which provide the best outcomes in their area.