The Federal Court recently handed down a major decision that will increase electricity prices for New South Wales customers by around $3 billion.
This reaffirms the Turnbull Government’s position of wanting to abolish the Limited Merits Review (LMR) process to stop network businesses gaming the system.
The Australian Energy Regulator (AER) had originally agreed to allow the networks to re-coup a much lower number but this was overturned by the Australian Competition Tribunal last year and subsequently upheld by the court today.
The Federal Government has had a clear policy to reform the LMR process but states who own network assets like Queensland and New South Wales have stood in the way those reforms.
By blocking attempts to stop network businesses gaming the system the Queensland and New South Wales governments have given a green light to higher electricity prices.
For some time the Turnbull Government together with the strong support of Victoria and South Australia has been trying to get the states to agree through the COAG Energy Council to stop this rort but self-interest by those looking to increase the value of their assets has hung consumers out to dry.
“Energy networks who have appealed determinations stand to earn an extra $7 billion over the next five years if their appeals are upheld.” – Josh Frydenberg, Media Release, 8 September 2016
The LMR process is the root cause of today’s decision which will see consumers paying more through higher electricity prices.
The LMR process allows energy networks to contest decisions of the AER through the Australian Competition Tribunal by appealing how much they can re-coup from customers.
Network businesses only appeal against the decision of the AER if they want to slug consumers more.
It is the clear view of the Turnbull Government that the AER is best placed to make decisions on how much energy companies can re-coup from consumers and not the Australian Competition Tribunal.
The COAG Energy Council reached a compromise position in December 2016 to reform the appeal mechanism.
The Federal Government calls on all the states to come together at the COAG Energy Council in July to implement the commitment made last December. If they don’t they will have to explain to consumers why they will have to pay higher power prices.