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Powerlink’s revised revenue proposal to the AER

In December 2016, Powerlink submitted a Revised Revenue Proposal to the Australian Energy Regulator (AER) for the 2018-2022 regulatory period. This was in response to the AER’s Draft Decision which was released in September 2016.

Powerlink’s Revised Revenue Proposal at a glance

  • The Revised Revenue Proposal is focused on responding to consumer concerns over electricity prices by driving increased efficiency and delivering cost reductions.
  • Powerlink continues to align with the AER’s guidelines and approach to meet the needs of customers while allowing for the continued delivery of reliable supply of electricity.
  • The AER’s Draft Decision accepted most of Powerlink’s January 2016 Revenue Proposal, including operating expenditure forecast and rate of return methodology.
  • The key element which was not accepted by the AER was forecast capital expenditure required for network investment. 
  • Powerlink has not accepted the AER’s Draft Decision and the Revised Revenue Proposal responds to matters raised by AER and includes a revised capital expenditure forecast.

Key Points of Powerlink’s Revised Revenue Proposal Include:

Electricity prices

  • 31% reduction in indicative transmission price in the first year of the regulatory period. This reflects a 3% increase from Powerlink’s January 2016 Revenue Proposal. (The cost of high voltage transmission represents approximately 9% of total delivered energy costs for a typical Queensland (QLD) residential electricity consumer)
  • Translates to between $25 and $41 savings (2.9%) for the average QLD residential household annual electricity bill. An increase from the $22 to $37 savings outlined in Powerlink’s 2016 Revenue Proposal.
  • Price Growth remains within CPI over the balance of the regulatory period

Maximum Allowed Revenue (MAR)

  • Original proposed MAR $4.02B (smoothed) – AERs Draft Decision proposed a reduction of 7.4%
  • Powelink’s Revised Revenue Proposal for MAR is $3.74B
  • 7% lower than Powerlink’s January 2016 Revenue Proposal for the 2018-2022 period
  • 0.6% higher than the AER’s Draft Decision due to revised capital expenditure forecast

Forecast Capital Expenditure

  • Original proposed forecast expenditure $957.1M – AERs Draft Decision proposed a reduction of 19.3%
  • Powerlink’s Revised Revenue Proposal for total capital expenditure forecast is $886M
  • 7% lower than Powerlink’s January 2016 Revenue Proposal for the 2018-2022 period
  • 15% higher than the AER’s Draft Decision

The costs/revenue and percentages have been referenced from both AER and Powerlink published documents.  There may be minor differences which could be the result of rounding and / or advising costs in smooth, nominal or real terms.

AER’s Final Determination is due to be released by 30 April 2017.

You can find more information regarding Powerlink’s proposal and the AER’s decision here.

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