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Court battles could see energy users lose 25% of price cuts

The Australian Energy Regulator has warned that consumers could lose as much as 25% in energy price cuts if energy networks win a series of court cases instituted against the regulator.

In its State of the Energy Market annual report the Australian Energy Regulator warned the cuts it has made to the price for electricity and gas distribution helped insulate consumers from the worst of the jump in wholesale gas and electricity prices.

The regulator said this protection was now in danger of being lost because network companies in NSW and other states have taken the issue to court in a bid to ramp up prices. In its report, the AER said: “Lower network charges have helped cushion the effect of rising wholesale prices on customer energy bills, but uncertainty remains due to appeals on AER decisions by the energy businesses to the Australian Competition Tribunal and the recent decisions of the Federal Court on some of these appeals.”

The AER forced NSW power networks to slash revenue by up to 20 percent. The prices it had set had forced electricity poles and wires firms, and gas distributors to cut prices by as much as 5.6 per cent a year.

The price cuts forced on Jemena, the NSW gas distributor, would have reduced gas bills for consumers by 25 per cent between 2015 and 2020. Large electricity networks in NSW and Queensland such as Ausgrid and Energex had been forced to make similar cuts.

The AER said this had balanced the dramatic rises in the wholesale price of electricity and gas caused by the decommissioning of coal-fired power stations and shortages of gas.

Energy price rises affected states differently

The AER, which has recently been given a role monitoring the wholesale market, highlighted how price rises have affected states differently. It said that in SA in the first nine months of this financial year the cost of generating electricity had jumped to $128 per megawatt hour from $67 last financial year, in Queensland to $108 from $64 and in NSW to $86 from $54. In Victoria, by contrast, power generation prices barely changed, but serious concerns were highlighted about Hazelwood power station. Wholesale prices in Tasmania also dropped. The AER said it had cut the amount of capital spending in the industry by 22 per cent compared to the previous five year period, only allowing efficient investments.

It had also cracked down on union-dominated industries, cutting operating and maintenance costs in the Queensland, NSW and ACT networks by an average of 27 per cent. But the network firms including Jemena Gas, Ausgrid and Endeavour in NSW have taken the AER to court. A total of 10 electricity distributors in NSW, the ACT, South Australia and Victoria, and two gas distributors in NSW and the ACT have appealed the AER decisions to the Australian Competition Tribunal. The NSW firms won a victory in the Federal Court which could partially reverse price cuts.

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