Aussie households may face ‘price spike’ as federal court favours electricity distribution companies

A federal court has rejected efforts to cut power prices, causing fears that households will have to deal with a “price spike.” One consumer group warned that such could run up to hundreds of dollars per year.

The Australian Energy Regulator lost on almost all counts when it tried to restrain the spending by power companies following protracted legal action. It said the New South Wales electricity distribution businesses, particularly the poles and wires companies, were less inefficient than their interstate counterparts.

The regulator found the Federal Court decision "disappointing” and refused to start further legal challenge. Household may need to prepare for substantial price hikes as power utilities push for higher costs. "There is the risk of a 'price spike' as the delayed price adjustment is implemented," Sydney Morning Herald quotes an official with one consumer group.

The decision, which was released on Wednesday, is expected to affect the regulator's dealings with the nation’s power industry. It is a windfall for those who paid the government to gain control of Ausgrid and Endeavour companies.

The Federal Court decision covers planned spending by the power companies between 2014 and 2019. It indicates that households will face substantially higher prices.

Paula Conboy, head of the AER, said they have to measure future prices once the decision’s full effect on the revenue of the distributors is clear. Power utilities officials reportedly said it would take time before the extent of price rises is known.

Transporting electricity from power stations to households costs around 40 percent of the electricity bill. This portion has been the focus of the legal fight as power companies sought to exploit their revenues by purchasing new equipment.

The AER argued that NSW distributors are not as efficient as their interstate counterparts and that households must not pay for such kind of management. The regulator’s original decision to cut power prices was appealed to the Australian Competition Tribunal. It also appealed the decision of the Tribunal to the Federal Court. Other options will now be reviewed by the AER.

Craig Memery, policy officer with the Public Interest Advocacy Centre, said the precedent set will affect future decisions by the regulator. Households across the country will be impacted.

According to some industry sources, the court decision could add up to $1.7 billion to Ausgrid's approved spending. Households are expected to bear the amount.

But NSW energy minister Don Harwin denied claims of price rises. He said the government has guarantees in place that will ensure lower prices charged by distributors in 2019.

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