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Could NSW residents run their homes for less?

Could NSW residents run their homes for less?

Those renting or paying off home loans in New South Wales may be surprised by a new report from Carbon + Energy Markets (CME), which suggests that household electricity prices could be a lot lower.

CME’s report, titled Privatisation and the regulatory valuation of electricity distribution network service providers in New South Wales: Evidence and issues, cited that NSW residents could be saving up to $325 per household, per year on electricity.

“NSW households are currently paying about twice as much per kWh for network services as Victorian households”, Public Interest Advocacy Centre (PIAC) senior policy officer Gabrielle Kuiper said. The PIAC commissioned the report.

Why do NSW residents pay more?

At present, electricity networks’ Regular Asset Bases (RABs) receive valuations. These valuations relate to network charges on homeowners’ electricity bills.

“[S]o the lower the valuation, the lower the bill,” explained Bruce Mountain, author of the CME report.

As of June 2013, the NSW electricity network was valued at $22 billion. But according to CME’s findings, this figure could have been significantly lower — which would translate to lower bills for NSW homeowners.

“If the RAB of the NSW electricity distribution network companies had been maintained or upgraded to the same standard as Victoria over the last 13 years, the NSW network would be worth $9 billion less than its June 2013 value of $22 billion,” the PIAC stated.

Where to from here?

Homeowners faced with hefty electricity bills — potentially impacting their savings account goals — may be wondering what could be in store in the future.

According to the PIAC, a $9 billion reduction in the NSW network valuation would translate to the following permanent yearly savings:

  • $195 for a household signed with Endeavour
  • $249 for a household in the Greater Sydney region signed with Ausgrid
  • $325 for a household in regional NSW signed with Essential Energy 

The state government plans to partially lease Ausgrid and Endeavour, which are distribution network service providers and TransGrid, which is a transmission network service provider. The CME concluded that devaluation of NSW electricity networks’ RABs could be a good forward step prior to the planned privatisation.

“[Devaluation] has the potential to be a win for consumers, retailers, non-distributed grid-connected generators, buyers at privatisation but also for the NSW government,” the CME report noted.

“This is because buyers may associate a lower RAB per connection with lower future asset revaluation risk. Future revenues will be regarded as less risky and hence more valuable.”

Whether or not this is effected will remain to be seen.

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