Should electricity networks be revalued in NSW?

Finding ways of reducing electricity prices has been high on the agenda for many state governments over recent years, but one report has come up with a strategy it believes might prove effective.

Research carried out by Carbon Energy Markets (CME) in conjunction with the Public Interest Advocacy Centre explains how the answer could lie with the valuation of electricity networks.

The report, titled Privatisation and the regulatory valuation of electricity distribution network service providers in New South Wales: Evidence and issues, points to an innovative way of bringing down bills across the board.

How big would the reductions to electricity prices be?

Study authors concluded that homeowners throughout New South Wales could see their electricity prices cut by as much as $325 a year if the plan outlined in the report is followed.

They argue that if they had been maintained or improved to the same level as Victoria over the last 13 years, the Regulated Asset Base of the NSW electricity distribution network companies would be valued at $13 billion.

This is $9 billion less than the value that was established back in June last year, which analysts believe would lead to considerable savings for consumers.

Not only this, businesses and energy retailers themselves look set to take advantage, especially if the Regulated Asset Base was devalued before it is privatised.

How would the savings take effect?

Bruce Mountain, author of the report and representative from CME, explained how network charges on electricity bills are closely linked to the Regulated Asset Base valuation of electricity networks.

In simple terms, the smaller the valuation of the networks, the less consumers will be expected to pay on their electricity bills.

Mr Mountain elaborated: "For the average household, a $9 billion write-down would translate into permanent annual bill reductions of $195 for Endeavour customers, $249 for Ausgrid customers (in the greater Sydney region) and $325 for Essential Energy customers (in country NSW)."

This suggestion could come as welcome news for the people of New South Wales, not least because another recent report highlighted just how difficult some consumers are finding it to meet energy costs.

Ernst & Young found 70 per cent of energy customers have been concerned about their ability to pay their electricity bill in the past 12 months.

Furthermore, over one in ten respondents said their energy bills were the biggest cause of stress on a daily basis.

Posted by Nikki Wilson-Everett