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Energex & Ergon Fees Rise

The Australian Energy Regulator (AER) has issued its draft determination on revenues for Energex and Ergon, for the 5-year period commencing 1 July 2015. In doing so, it reinforced its philosophic dedication to the "user pays" principle, under which it requires developers (i.e. land purchasers) to pay the full cost of new infrastructure required for subdivisions. No regard is given to the fact that the new infrastructure will then be a source of revenue for the next 25 years or so, or that these new land purchasers will have to contribute to the cost of upgrading the old existing network through their electricity charges.

The largest increases are in Ergon's area. There are two reasons for this:

  1. Ergon's network is "thinner" - more spread out, with less spare capacity - so the cost of augmenting the network is usually higher than for Energex.
  2. Ergon has adopted a more rigid application of AER's pricing rules than Energex.

ENERGEX

Agreement fees and switching charges have risen by around $1000-$5000 for a typical subdivision, but that varies from job to job. Not too dramatic, but just another cost to factor in.

ERGON

This is where the cost increases will really be felt, for the reasons stated above.

The initial application fee will vary from about $500 up to $6000, depending on how much investigation Ergon needs to do to determine its need for upstream augmentation.

The big cost will be if upstream augmentation is required.  Whereas Ergon used to subsidise this in the past, the developer will now be required to pay 100% of the cost, unless it can be shared with another development in the next 5 years. This is regardless of other considerations, including the fact that the additional infrastructure will improve the reliability and load-carrying capacity of Ergon's existing network.  This cost can amount to $100 000 - $200 000, or more.

The problem for developers is this: They might have to spend $5000 for an initial application, only to find out that the upstream infrastructure charge could be so high that the development would not be profitable.

We can see this policy having a negative effect on regional development.