Essential Energy’s Regulatory Proposal for 2024-29 is almost finalised.
Our regulator, the Australian Energy Regulator, has provided its draft decision on the Regulatory Proposal that we submitted in January 2023, largely approving what we proposed.
This Proposal, which outlines our plans for the next five years, was built based on engagement with you, our customers, during several forums from 2021 through to 2023.
Since January, we have also continued to refine a few elements of our Proposal, including through talking to customers who are part of our new Essential People’s Panel.
However, we know that the last few months have been tough on many of us, with costs increasing for a lot of our everyday essentials.
This also means we are now expecting our network costs for the next 5 years to be higher than what we last presented to you.
So, we want to check in with you to see whether you still support our approach for 2024-29, particularly the new investments targeting a more resilient and future-focused network.
We ask that you share your thoughts with us in a short survey that was sent to you from Woolcott Research & Engagement.
If you missed Wednesday’s webinar, you can watch PART ONE HERE and PART TWO HERE. We have also provided a summary of the information presented, below.
What have we been doing since we last met?
Since we met last year, we have been continuing to work on our plans for 2024-29. Following the customer forums we held with you in September and October 2022, we incorporated your feedback into our Regulatory Proposal that we submitted to the Australian Energy Regulator in January 2023.
Our Regulatory Proposal outlines our plans for the next five years reflects your priorities and your feedback on which investments we should be making and when.
Since then, the Australian Energy Regulator has been reviewing this Proposal to understand if it meets the needs of our customers. They released their draft decision on our Proposal on 28 September 2023 which largely approved our Proposal.
We have also been making some small refinements to some of our plans for 2024-29. We outline these changes below.
What did the AER think about our Proposal?
The AER’s Draft Decision largely approved the Proposal we submitted in January 2023, noting that Essential Energy’s consumer engagement was a key factor in their decision to accept what we proposed. The AER has also noted that:
“Our draft decision comes at a challenging time for energy consumers and the sector more broadly. It seeks to balance affordability with necessary expenditure required to support the energy transition.”
Table 1: Overview of AER Draft Decision on Customers’ Priorities
OUR CUSTOMER PRIORITIES | AER DRAFT DECISION |
SAFETY | The AER has accepted our expenditure on initiatives to manage the network to reduce bushfires and other hazards |
RELIABILITY AND RESILIENCE | The AER has largely accepted our expenditure to: - Maintain reliability under normal conditions
- Improve community and network resilience to extreme weather events
|
AFFORDABILITY | The AER has acknowledged our approach to balancing affordability with other investment priorities |
GOOD CUSTOMER SERVICE AND COMMUNICATION | The AER has accepted our improved customer service metrics developed with customers |
FUTURE FOCUSED NETWORK | The AER has accepted our proposed investments for: - Improving power quality
- Facilitating greater levels of exports and electric vehicles
- Reducing carbon emissions by more than 160,000 equivalent tonnes
|
COLLECTIVE BENEFIT | The AER has accepted our approach to delivering our customers a collective benefit through our plans to transition to more cost-reflective and two-way prices that charge for both consumption and exports. |
TRANSPARENCY AND SIMPLICITY | The AER has accepted our expenditure on a new customer system with basic portal |
What investments are included in our Proposal?
Our Proposal included the range of investments that you supported us making over the next 5 years to build a more resilient and future-focused network. The AER has largely approved our resilience and future network expenditure.
Table 2: Summary of proposed investments supported by our customers
TYPE OF INVESTMENT | INVESTMENT DETAILS | CUSTOMER BENEFITS |
COMPOSITE POLES | - Broadly use composite poles in our pole replacement program.
- Proactively install composite poles in areas we identify are at high-risk of experiencing an extreme weather event.
| - Our network’s recovery from storms, wind and bushfires will be quicker because composite poles better withstand these events.
- Composite poles last longer in normal conditions as they are immune to rot, termites and corrosion.
|
UNDERGROUNDING | - Underground some poor condition network in very high-risk areas.
| - Surrounding customers will see reduced safety risks as there is less risk of contact with our poles and wires.
- Faults in these locations become rarer.
- Visual impact of overhead powerlines is removed.
|
COMMUNITY RESILIENCE | - Continue to support communities after extreme weather events, as we did in the 2019 and 2020 bushfires, the 2021 Mid North Coast Floods and the 2022 Far North Coast Floods.
- Employ 3x additional staff to work with Councils, communities and critical infrastructure asset providers to develop local resilience plans.
- Invest in 2x portable trailers that can be moved to emergency sites to provide:
- A community hub to allow more effective communication and support for communities; and
- A depot for our staff to help deliver a more efficient response.
- Purchase new large and domestic generators, portable Stand Alone Power Systems, and portable solar streetlights.
| - Provide broader access to temporary power supplies after major events.
- Improve community safety through improved communications and streetlighting.
- Faster recovery efforts through allowing us to set up a temporary depot.
|
STAND ALONE POWER SYSTEMS (SAPS) | - Install up to 400 SAPS by mid 2029 and continue rolling out SAPS beyond 2029
- Install up to 7 microgrids by 2029
| - Improved reliability for SAPS and microgrid customers
- Moderate cost savings over the long term for all customers
|
LOWERING OUR ENVIRONMENTAL IMPACT | - Invest in solar panels at 20 of our Essential Energy depots
- Move 70% of our light vehicles and 30% of our heavy vehicles to electric vehicles (where cost effective to do so)
| - Moderate cost savings for all customers, given these will reduce electricity and fuel costs.
- Reduce our carbon and vehicle emissions.
|
A SMARTER NETWORK | - Enabling more real-time monitoring on our network through:
- Investing widely in network sensors and customer meter data; and
- Implementing a data management system to manage power quality at lower cost than if we managed it manually.
- Investing in dynamic assets that can respond to signals to keep the network operating within its technical limits:
- In locations to mitigate existing problems with power quality; and
- In areas with likely future problems – effectively preparing us to be able to deal with power quality issues before they arise.
| - Enable more customer exports on our network at lower costs.
- Improve our ability to proactively identify outages rather than wait for customers to advise of outages, which will significantly improve our response times.
- Improve our ability to manage power quality issues.
- Investing in these technologies now also reduces the need for investment in these technologies in the future.
|
CUSTOMER SERVICE | - Implement a new system for us to record and manage our interactions with our customers in one place.
- Introduce an online portal to provide customers with online access to information about their property and communication preferences.
| - Improve our customers’ experience.
- Improved call times to our call centre.
|
What has changed since we last spoke?
While what we submitted in January has largely been accepted, there are a few areas which we committed to doing some more work on, when we submitted our Regulatory Proposal in January.
None of these changes impact on how much revenue we recover or will change how much our costs are; they are only to provide more detail on what we have already proposed.
Customer Service Targets
We previously asked you about what customer service measures are important to you and where we need to focus on making improvements.
Together, we decided on 3 measures that should be included as part of the Customer Service Incentive Scheme. This scheme means we set a performance target and we receive either a penalty or reward based on our performance each year over the next 5 years. We also previously decided how much each measure should be weighted.
We have since gone away and analysed our current performance to set the right targets for these 3 measures for the next 5 years.
We do of course use more ways to measure our customer service so that we can continually improve our service to you, our customers. But these 3 measures will be the measures that we will receive a reward or penalty on.
We believe these targets strike the right balance between driving us to continually improve on our customer service to you, but still being achievable.
Flexible Connection Agreements
Last year, we also discussed the introduction of Flexible Connection Agreements with you.
These agreements are one of the ways to deal with power quality issues stemming from the growing number of exports onto our network.
Our current approach is to place automatic limits on customers exports; as part of a customer’s connection agreement with us, customers are automatically only approved to export only up to 5kW in urban areas and 3kW in rural areas.
This is a blanket approach to something that is not a problem every day. Customers may be able to export higher amounts but first must apply for approval from Essential Energy.
Even with these limits in place, we will quickly run out of capacity on our network due to the growth in exports.
So, when we last discussed this, you supported us moving away from fixed export limits towards Flexible Connection Agreements for new connections or upgrades. These agreements would allow us to reduce customers’ exports for the few hours on the handful of days where we are exceeding the limits of our network. But for most days of the year, customers will be able to export the full amount.
Before implementing these agreements, we also need to consider how we reduce exports on those handful of days each year. For example, should we reduce everyone’s exports by the same amount of energy or target the largest exporters first? You told us you thought it was fairer to reduce all exporters proportionally (i.e. by the same percentage) or to reduce larger exporters first.
We have taken this feedback on board and are developing trials for Flexible Connection Agreements with customers. We are aiming to have these Agreements in place before 2027.
Sun Soaker Tariff and Export Price
The other element we have been refining is our Sun Soaker Tariff which includes an export price.
This tariff includes a price for consuming electricity, which has:
- Lower off-peak prices over the middle of the day and overnight; and
- Higher peak prices at the other times.
This part of the tariff has been designed to encourage our customers to move their energy use to times of the day when there is less demand on our network, as well as during times when there is a surplus of solar on our network.
This tariff also includes a price for exporting electricity.
This price provides customers with:
- a charge if you export over a certain amount from your solar panels or battery during 10am and 3pm; and
- a payment if you export any electricity between 5pm and 8pm.
Keep in mind, this export charge is effectively just a slight reduction in what you are paid through your feed-in tariff.
This price structure is the same for every day of the week.
Since we last met with you, we have simplified some aspects of the export price based on the results of some trials we were running, as well as feedback from retailers and our Essential People’s Panel
We now have 2 export bands; one Free Band and then all exports above this free amount will be charged at the same rate.
We are now also charging for exports based on kWh instead of kW. This change means that we will now charge based on how much energy a customer exports in total during 10am-3pm. This aligns with how we charge you already for your consumption, and how we will pay you for the rebate.
Our modelling also shows that the vast majority of customers who move onto the Sun Soaker from a flat rate tariff will be slightly better off. Feedback from customers at the last forum, as well as our People’s Panel, included that we should therefore move customers onto the Sun Soaker as soon as we can, given the customer benefits.
Originally, we were planning on doing a more phased approach but based on feedback from our People’s Panel, from 1 July 2024, customers who are newly connected, or have an upgrade to their meter or connection, will be moved to the Sun Soaker tariff. Existing smart meter customers will also be able to opt-in from then too.
Under the energy rules, we are unable to charge export prices until 1 July 2025, so for those customers on the Sun Soaker before this, export charges and rebates will be set at zero until July 2025.
We have kept our plans to move our existing smart meter customers onto the Sun Soaker and export price by 1 July 2028. This provides customers who have already invested in solar panels with 5 years to recover the cost of their investments, and allows us time to get our new billing system up and running. These customers can always opt-in earlier if they wish to take advantage of this tariff.
Changing tariffs is not about Essential Energy making any more money, as the revenue we are allowed to recover from customers is set by our regulator. This new tariff is about improving fairness in the respective prices that different customers pay – to better reflect the costs they impose on the network.
Prior to moving customers onto the Sun Soaker and Export Price, we will be undertaking a consumer education and awareness campaign. This was something that has been raised in customer forums and by our People’s Panel so we want you to know that we have heard this.
How much will your Proposal cost?
As you would have been seeing in your everyday life, the costs of most things are going up due to higher input costs and interest rates due to inflation. As we talked about the last time we met, these factors also impact on our costs which, unfortunately, we have no control over.
Our plans for the next five years, which were developed with you and have been approved by the AER in their Draft Decision, will see an average annual network bill for households of around $885 a year between 2024-29. This is an increase of $40 on this year’s bill.
This includes around $10 of new investments in building a resilient and future-focused network which were identified as key priorities by our customers. You overwhelmingly supported investments such as composite poles, network monitoring technologies, and microgrids. More information on these investments are outlined above. Last year we estimated that these costs would be $8 but we are now estimating they will be slightly higher than this ($10).
The bulk of your network bill – around $875 - is made up of our must do activities. These must-do activities includes things like maintenance, vegetation management, fault and emergency works, fleet and property costs, as well as the costs of paying for the previous investments we have made in existing assets. These costs are increasing mostly due to inflation and interest rates, but in part also due to a regulatory change in how we treat costs associated with metering.
What are these additional metering costs?
A transition to smart meters is currently underway in NSW and other states.
Less than 40% of our customers currently have a smart meter but this number is growing every day. Smart meters measure your real-time energy consumption data, which is then remotely sent to a meter provider who will pass this information onto your retailer.
Most of our customers still have what is known as a legacy meter. These are the meters that only measure your total energy use and must be manually read by a meter reader every quarter. They don’t measure at what times of the day you use energy.
Smart meters deliver a lot of benefits to both customers and to networks. They enable customers to better understand and manage their energy use to reduce their bills and open the door to accessing more innovative retail products and services like energy management apps.
They also deliver networks benefits, mostly through providing us with more real-time data. This helps us detect faults and outages more quickly and enables us to better monitor power quality.
However, this transition to installing smart meters is the responsibility of retailers and is taking some time.
As such, just last month, the agency that makes the rules in the energy market, the Australian Energy Market Commission (AEMC), released a report about setting in place rules to accelerate this transition to smart meters, due to the benefits they will bring to all customers. The AEMC has now set the target of having 100% of customers with a smart meter by 2030.
However, the transition to smart meters does not come without costs. Accelerating this transition also brings forward some of the costs relating to dealing with the legacy metering equipment and making any some site upgrades to enable the installation of smart meters.
The AEMC has found that the benefits of bringing forward the transition to smart meter still outweigh the costs, ultimately accelerating lower energy bills for customers.
Most customers have already been paying some costs for their meters. How much you were paying depends on what meter you have and how long you’ve had it for.
We haven’t spoken to you about metering costs before because they are a different component of your network charge and were largely set, and the AEMC’s metering review report is new.
Changes to how much you are paying for metering depends on how much you were paying before. Additionally, retailers can pass on these costs in any form they wish so it is hard to say exactly what ends up on each customer’s bill.
We are still working through the costs and bill impacts with the AER, but on average we expect our customers will pay around an additional $18 per year for the next 5 years.
The decision to accelerate the rollout and bring some of these costs forward is ultimately not Essential Energy’s decision, but it something we wanted you to be aware of.
Essential Energy’s Regulatory Proposal for 2024-29 is almost finalised.
Our regulator, the Australian Energy Regulator, has provided its draft decision on the Regulatory Proposal that we submitted in January 2023, largely approving what we proposed.
This Proposal, which outlines our plans for the next five years, was built based on engagement with you, our customers, during several forums from 2021 through to 2023.
Since January, we have also continued to refine a few elements of our Proposal, including through talking to customers who are part of our new Essential People’s Panel.
However, we know that the last few months have been tough on many of us, with costs increasing for a lot of our everyday essentials.
This also means we are now expecting our network costs for the next 5 years to be higher than what we last presented to you.
So, we want to check in with you to see whether you still support our approach for 2024-29, particularly the new investments targeting a more resilient and future-focused network.
We ask that you share your thoughts with us in a short survey that was sent to you from Woolcott Research & Engagement.
If you missed Wednesday’s webinar, you can watch PART ONE HERE and PART TWO HERE. We have also provided a summary of the information presented, below.
What have we been doing since we last met?
Since we met last year, we have been continuing to work on our plans for 2024-29. Following the customer forums we held with you in September and October 2022, we incorporated your feedback into our Regulatory Proposal that we submitted to the Australian Energy Regulator in January 2023.
Our Regulatory Proposal outlines our plans for the next five years reflects your priorities and your feedback on which investments we should be making and when.
Since then, the Australian Energy Regulator has been reviewing this Proposal to understand if it meets the needs of our customers. They released their draft decision on our Proposal on 28 September 2023 which largely approved our Proposal.
We have also been making some small refinements to some of our plans for 2024-29. We outline these changes below.
What did the AER think about our Proposal?
The AER’s Draft Decision largely approved the Proposal we submitted in January 2023, noting that Essential Energy’s consumer engagement was a key factor in their decision to accept what we proposed. The AER has also noted that:
“Our draft decision comes at a challenging time for energy consumers and the sector more broadly. It seeks to balance affordability with necessary expenditure required to support the energy transition.”
Table 1: Overview of AER Draft Decision on Customers’ Priorities
OUR CUSTOMER PRIORITIES | AER DRAFT DECISION |
SAFETY | The AER has accepted our expenditure on initiatives to manage the network to reduce bushfires and other hazards |
RELIABILITY AND RESILIENCE | The AER has largely accepted our expenditure to: - Maintain reliability under normal conditions
- Improve community and network resilience to extreme weather events
|
AFFORDABILITY | The AER has acknowledged our approach to balancing affordability with other investment priorities |
GOOD CUSTOMER SERVICE AND COMMUNICATION | The AER has accepted our improved customer service metrics developed with customers |
FUTURE FOCUSED NETWORK | The AER has accepted our proposed investments for: - Improving power quality
- Facilitating greater levels of exports and electric vehicles
- Reducing carbon emissions by more than 160,000 equivalent tonnes
|
COLLECTIVE BENEFIT | The AER has accepted our approach to delivering our customers a collective benefit through our plans to transition to more cost-reflective and two-way prices that charge for both consumption and exports. |
TRANSPARENCY AND SIMPLICITY | The AER has accepted our expenditure on a new customer system with basic portal |
What investments are included in our Proposal?
Our Proposal included the range of investments that you supported us making over the next 5 years to build a more resilient and future-focused network. The AER has largely approved our resilience and future network expenditure.
Table 2: Summary of proposed investments supported by our customers
TYPE OF INVESTMENT | INVESTMENT DETAILS | CUSTOMER BENEFITS |
COMPOSITE POLES | - Broadly use composite poles in our pole replacement program.
- Proactively install composite poles in areas we identify are at high-risk of experiencing an extreme weather event.
| - Our network’s recovery from storms, wind and bushfires will be quicker because composite poles better withstand these events.
- Composite poles last longer in normal conditions as they are immune to rot, termites and corrosion.
|
UNDERGROUNDING | - Underground some poor condition network in very high-risk areas.
| - Surrounding customers will see reduced safety risks as there is less risk of contact with our poles and wires.
- Faults in these locations become rarer.
- Visual impact of overhead powerlines is removed.
|
COMMUNITY RESILIENCE | - Continue to support communities after extreme weather events, as we did in the 2019 and 2020 bushfires, the 2021 Mid North Coast Floods and the 2022 Far North Coast Floods.
- Employ 3x additional staff to work with Councils, communities and critical infrastructure asset providers to develop local resilience plans.
- Invest in 2x portable trailers that can be moved to emergency sites to provide:
- A community hub to allow more effective communication and support for communities; and
- A depot for our staff to help deliver a more efficient response.
- Purchase new large and domestic generators, portable Stand Alone Power Systems, and portable solar streetlights.
| - Provide broader access to temporary power supplies after major events.
- Improve community safety through improved communications and streetlighting.
- Faster recovery efforts through allowing us to set up a temporary depot.
|
STAND ALONE POWER SYSTEMS (SAPS) | - Install up to 400 SAPS by mid 2029 and continue rolling out SAPS beyond 2029
- Install up to 7 microgrids by 2029
| - Improved reliability for SAPS and microgrid customers
- Moderate cost savings over the long term for all customers
|
LOWERING OUR ENVIRONMENTAL IMPACT | - Invest in solar panels at 20 of our Essential Energy depots
- Move 70% of our light vehicles and 30% of our heavy vehicles to electric vehicles (where cost effective to do so)
| - Moderate cost savings for all customers, given these will reduce electricity and fuel costs.
- Reduce our carbon and vehicle emissions.
|
A SMARTER NETWORK | - Enabling more real-time monitoring on our network through:
- Investing widely in network sensors and customer meter data; and
- Implementing a data management system to manage power quality at lower cost than if we managed it manually.
- Investing in dynamic assets that can respond to signals to keep the network operating within its technical limits:
- In locations to mitigate existing problems with power quality; and
- In areas with likely future problems – effectively preparing us to be able to deal with power quality issues before they arise.
| - Enable more customer exports on our network at lower costs.
- Improve our ability to proactively identify outages rather than wait for customers to advise of outages, which will significantly improve our response times.
- Improve our ability to manage power quality issues.
- Investing in these technologies now also reduces the need for investment in these technologies in the future.
|
CUSTOMER SERVICE | - Implement a new system for us to record and manage our interactions with our customers in one place.
- Introduce an online portal to provide customers with online access to information about their property and communication preferences.
| - Improve our customers’ experience.
- Improved call times to our call centre.
|
What has changed since we last spoke?
While what we submitted in January has largely been accepted, there are a few areas which we committed to doing some more work on, when we submitted our Regulatory Proposal in January.
None of these changes impact on how much revenue we recover or will change how much our costs are; they are only to provide more detail on what we have already proposed.
Customer Service Targets
We previously asked you about what customer service measures are important to you and where we need to focus on making improvements.
Together, we decided on 3 measures that should be included as part of the Customer Service Incentive Scheme. This scheme means we set a performance target and we receive either a penalty or reward based on our performance each year over the next 5 years. We also previously decided how much each measure should be weighted.
We have since gone away and analysed our current performance to set the right targets for these 3 measures for the next 5 years.
We do of course use more ways to measure our customer service so that we can continually improve our service to you, our customers. But these 3 measures will be the measures that we will receive a reward or penalty on.
We believe these targets strike the right balance between driving us to continually improve on our customer service to you, but still being achievable.
Flexible Connection Agreements
Last year, we also discussed the introduction of Flexible Connection Agreements with you.
These agreements are one of the ways to deal with power quality issues stemming from the growing number of exports onto our network.
Our current approach is to place automatic limits on customers exports; as part of a customer’s connection agreement with us, customers are automatically only approved to export only up to 5kW in urban areas and 3kW in rural areas.
This is a blanket approach to something that is not a problem every day. Customers may be able to export higher amounts but first must apply for approval from Essential Energy.
Even with these limits in place, we will quickly run out of capacity on our network due to the growth in exports.
So, when we last discussed this, you supported us moving away from fixed export limits towards Flexible Connection Agreements for new connections or upgrades. These agreements would allow us to reduce customers’ exports for the few hours on the handful of days where we are exceeding the limits of our network. But for most days of the year, customers will be able to export the full amount.
Before implementing these agreements, we also need to consider how we reduce exports on those handful of days each year. For example, should we reduce everyone’s exports by the same amount of energy or target the largest exporters first? You told us you thought it was fairer to reduce all exporters proportionally (i.e. by the same percentage) or to reduce larger exporters first.
We have taken this feedback on board and are developing trials for Flexible Connection Agreements with customers. We are aiming to have these Agreements in place before 2027.
Sun Soaker Tariff and Export Price
The other element we have been refining is our Sun Soaker Tariff which includes an export price.
This tariff includes a price for consuming electricity, which has:
- Lower off-peak prices over the middle of the day and overnight; and
- Higher peak prices at the other times.
This part of the tariff has been designed to encourage our customers to move their energy use to times of the day when there is less demand on our network, as well as during times when there is a surplus of solar on our network.
This tariff also includes a price for exporting electricity.
This price provides customers with:
- a charge if you export over a certain amount from your solar panels or battery during 10am and 3pm; and
- a payment if you export any electricity between 5pm and 8pm.
Keep in mind, this export charge is effectively just a slight reduction in what you are paid through your feed-in tariff.
This price structure is the same for every day of the week.
Since we last met with you, we have simplified some aspects of the export price based on the results of some trials we were running, as well as feedback from retailers and our Essential People’s Panel
We now have 2 export bands; one Free Band and then all exports above this free amount will be charged at the same rate.
We are now also charging for exports based on kWh instead of kW. This change means that we will now charge based on how much energy a customer exports in total during 10am-3pm. This aligns with how we charge you already for your consumption, and how we will pay you for the rebate.
Our modelling also shows that the vast majority of customers who move onto the Sun Soaker from a flat rate tariff will be slightly better off. Feedback from customers at the last forum, as well as our People’s Panel, included that we should therefore move customers onto the Sun Soaker as soon as we can, given the customer benefits.
Originally, we were planning on doing a more phased approach but based on feedback from our People’s Panel, from 1 July 2024, customers who are newly connected, or have an upgrade to their meter or connection, will be moved to the Sun Soaker tariff. Existing smart meter customers will also be able to opt-in from then too.
Under the energy rules, we are unable to charge export prices until 1 July 2025, so for those customers on the Sun Soaker before this, export charges and rebates will be set at zero until July 2025.
We have kept our plans to move our existing smart meter customers onto the Sun Soaker and export price by 1 July 2028. This provides customers who have already invested in solar panels with 5 years to recover the cost of their investments, and allows us time to get our new billing system up and running. These customers can always opt-in earlier if they wish to take advantage of this tariff.
Changing tariffs is not about Essential Energy making any more money, as the revenue we are allowed to recover from customers is set by our regulator. This new tariff is about improving fairness in the respective prices that different customers pay – to better reflect the costs they impose on the network.
Prior to moving customers onto the Sun Soaker and Export Price, we will be undertaking a consumer education and awareness campaign. This was something that has been raised in customer forums and by our People’s Panel so we want you to know that we have heard this.
How much will your Proposal cost?
As you would have been seeing in your everyday life, the costs of most things are going up due to higher input costs and interest rates due to inflation. As we talked about the last time we met, these factors also impact on our costs which, unfortunately, we have no control over.
Our plans for the next five years, which were developed with you and have been approved by the AER in their Draft Decision, will see an average annual network bill for households of around $885 a year between 2024-29. This is an increase of $40 on this year’s bill.
This includes around $10 of new investments in building a resilient and future-focused network which were identified as key priorities by our customers. You overwhelmingly supported investments such as composite poles, network monitoring technologies, and microgrids. More information on these investments are outlined above. Last year we estimated that these costs would be $8 but we are now estimating they will be slightly higher than this ($10).
The bulk of your network bill – around $875 - is made up of our must do activities. These must-do activities includes things like maintenance, vegetation management, fault and emergency works, fleet and property costs, as well as the costs of paying for the previous investments we have made in existing assets. These costs are increasing mostly due to inflation and interest rates, but in part also due to a regulatory change in how we treat costs associated with metering.
What are these additional metering costs?
A transition to smart meters is currently underway in NSW and other states.
Less than 40% of our customers currently have a smart meter but this number is growing every day. Smart meters measure your real-time energy consumption data, which is then remotely sent to a meter provider who will pass this information onto your retailer.
Most of our customers still have what is known as a legacy meter. These are the meters that only measure your total energy use and must be manually read by a meter reader every quarter. They don’t measure at what times of the day you use energy.
Smart meters deliver a lot of benefits to both customers and to networks. They enable customers to better understand and manage their energy use to reduce their bills and open the door to accessing more innovative retail products and services like energy management apps.
They also deliver networks benefits, mostly through providing us with more real-time data. This helps us detect faults and outages more quickly and enables us to better monitor power quality.
However, this transition to installing smart meters is the responsibility of retailers and is taking some time.
As such, just last month, the agency that makes the rules in the energy market, the Australian Energy Market Commission (AEMC), released a report about setting in place rules to accelerate this transition to smart meters, due to the benefits they will bring to all customers. The AEMC has now set the target of having 100% of customers with a smart meter by 2030.
However, the transition to smart meters does not come without costs. Accelerating this transition also brings forward some of the costs relating to dealing with the legacy metering equipment and making any some site upgrades to enable the installation of smart meters.
The AEMC has found that the benefits of bringing forward the transition to smart meter still outweigh the costs, ultimately accelerating lower energy bills for customers.
Most customers have already been paying some costs for their meters. How much you were paying depends on what meter you have and how long you’ve had it for.
We haven’t spoken to you about metering costs before because they are a different component of your network charge and were largely set, and the AEMC’s metering review report is new.
Changes to how much you are paying for metering depends on how much you were paying before. Additionally, retailers can pass on these costs in any form they wish so it is hard to say exactly what ends up on each customer’s bill.
We are still working through the costs and bill impacts with the AER, but on average we expect our customers will pay around an additional $18 per year for the next 5 years.
The decision to accelerate the rollout and bring some of these costs forward is ultimately not Essential Energy’s decision, but it something we wanted you to be aware of.
