Presentation by AER s Consumer Challenge Panel (CCP) sub-panel 7. Robyn Robinson

Transcription

1 Presentation by AER s Consumer Challenge Panel (CCP) sub-panel 7 Robyn Robinson

2 Role of the Consumer Challenge Panel (CCP) AER overall view on CCP advice in the Draft Decision Environmental considerations Rate of return Capital expenditure (capex) Operating expenditure (opex) Pipeline services Tariffs Consumer engagement

3 Challenge the businesses and the AER Reviewed documentation, met with the AER and JGN, met with JGN s Customer Council and with individual large customers, presented to a public forum organised by JGN, and toured JGN gas facilities Provided formal (published) advice to the AER

4 The newly formed Consumer Challenge Panel (CCP) played a significant role in our processes of assessing the proposal before us. The panel advised us on issues that are important to consumers and provided consumer perspectives, particularly those of residential and small business consumers.

5 Previous decision made during a period of Global Financial Crisis (GFC) concerns Consumers expecting network prices to reduce Forecast increase in domestic wholesale gas prices Overall demand falling / flat Full implementation of the National Energy Customer Framework (NECF) in New South Wales from 1 July 2013 New AER Guidelines have been introduced as part of the Better Regulation program Much greater involvement of consumers than ever before a new process for all parties

6 CCP advice AER Draft Decision Considered proposed rate of return too high at 8.67% Reduced rate of return to 6.8% There may be scope for further reduction CCP has provided whole of CCP advice to AER on rate of return

7 CCP advice AER Draft Decision Concern about forecast 30% increase over approved capex for Examine higher delivery costs for market expansion capex Examine justification of reinforcement / renewal projects Examine justification of IT projects Total capex reduced by 18.7% from $1,130.4 million to $918.6 million ($ ) 22% reduction in capex for new connections Driven by reduction in unit rates and a slight reduction in estimated new connections Capex reduced from $384.1 million to million ($ ) 8 renewal and upgrade projects not prudent and efficient. Capex reduction $19.7 million. 11 augmentation projects not prudent and efficient. Capex reduction $8.1 million. All $127.9 million is accepted

8 CCP advice AER Draft Decision Reasonably comfortable with proposed opex Conditional support for Efficiency Benefit Sharing Scheme (EBSS) Consider Capital Expenditure Sharing Scheme (CESS) 1.2% reduction in opex from $789.3 million to $779.7 million ($ ) Efficiency carryover mechanism accepted Not proposed by JGN or by AER We accept that a CESS is not necessary if AER is satisfied that JGN s opex is efficient

9 CCP advice AER Draft Decision Bundling of meter data services will present a potential barrier to future contestability of meter data services The AER found no compelling reasons not to approve JGN s Proposal The AER may review its draft decision in its final decision should stakeholder submissions provide compelling reasons not to merge metering data services into a single reference service* * We continue to hold concerns regarding barriers to future contestability of meter data services

10 Restructuring of tariffs Rebalancing of tariffs between residential, commercial and industrial customer segments Tariff design to take into account affordability Presentation of tariff information New tariffs for energy intermediaries: ensure that appropriate consumer protections are in place for customers of gas intermediaries, particularly users of energy supplied in the form of gas hot water

11 CCP overall advice on consumer engagement JGN demonstrated a genuine commitment to customer engagement taking account of CE Guidelines and other sources Most consumer engagement was at the inform level, with some attempts at consult and involve levels. (The next levels are collaborate and empower ) Commended JGN for new initiatives, including commitment to assist vulnerable customers

12 Opportunities for improvement identified by the CCP Customer Council Extend areas where the Customer Council can add value and fully participate at the consult level and beyond Stakeholder workshops improvement in design of Willingness to Pay surveys More comprehensive engagement with large industrial customers and retailers Community engagement has been largely centred on JGN s website, and registration to receive updates

13 Opportunities for improvement - AER The AER might provide clearer explanation of how consumer engagement by the network business has influenced the outcome of the (draft) determination For example: - $6.59m step change in opex for Marketing was supported by customers. What bearing did that have on the AER s (draft) decision to include that in total opex? - Customers supported a proposal to equalise service levels for all existing customers for an additional cost of $0.60 per year for 5 years, and $0.90 per year for the following 15 years. How has this support been reflected in the draft determination?

14 THANK YOU