High valuation of NSW electricity assets costing households $325 a year

New research by Carbon + Energy Markets (CME) has found that a more realistic valuation of NSW electricity networks’ assets prior to privatisation could cut bills for households by up to $325 per year.

The report, Privatisation and the regulatory valuation of electricity distribution network service providers in New South Wales: Evidence and issues, finds that if the Regulated Asset Base (RAB) of the NSW electricity distribution network companies had been maintained or upgraded to the same standard as Victoria over the last thirteen years, the NSW network would be worth $9 billion less than its June 2013 value of $22 billion, resulting in big savings for consumers.
electricity poles

‘The valuation of electricity networks’ RAB is tied to network charges on electricity bills – so the lower the valuation, the lower the bill,’ said Bruce Mountain from CME, author of the report.

‘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).

‘A devaluation of the Regulated Asset Base prior to privatisation would be a win for consumers, retailers and also for buyers at privatisation.

‘A lower regulatory valuation need not translate into lower privatisation proceeds, in fact, a higher market valuation may compensate for some, all or more of the RAB devaluation. A pre-privatisation RAB write-down therefore offers the potential for better outcomes for all parties,’ said Bruce Mountain.

The report was commissioned by the Public Interest Advocacy Centre’s Energy + Water Consumer Advocacy Program, which represents the interests of residential consumers in NSW.

‘The New South Wales Government has committed to leasing 49 per cent of NSW’s electricity network assets. Given that the increase in network prices in NSW has driven significant electricity price rises in recent years, it is important to examine the consequences for consumers of how the networks might be valued in the sale process,’ said PIAC Senior Policy Officer, Dr Gabrielle Kuiper.

‘On the basis of this report, we recommend that the NSW Government tests these ideas as part of the leasing process. NSW households are currently paying about twice as much per kWh for network services as Victorian households and the lease process is an ideal time to explore options for reducing these cost pressures for NSW households and businesses’.

Photo Credit: miuenski (cc)