The Australian Competition and Consumer Commission today issued its final decision on the revenue cap* for Queensland’s electricity transmission services, operated by Powerlink.
The ACCC put a cap on Powerlink's earnings of $318.50 million in 2002 ranging up to $489.86 million in 2006/07. This is in line with both the principles of the National Electricity Code and the ACCC’s Draft Principles for the Regulation of Transmission Revenues.
The revenue cap was based on a post-tax nominal return on equity of 11.8 per cent and an opening asset balance of $2,277 million.
By capping the revenues of the transmission networks, the ACCC aims to constrain monopoly pricing while allowing the business owners a rate of return sufficient to fund network operation and expansion.
"The decision takes into account Powerlink's proposed capital expenditure program which will exceed $1 billion over the next five years", ACCC Chairman, Professor Allan Fels, said today.
"This will go a long way to ensuring the Queensland system can meet future demand while also improving reliability of electricity services.
"This is particularly pertinent as Queensland's generators are largely concentrated in Central Queensland. A reliable transmission network is important, as demand is heaviest around the major population centres in south-east and far north Queensland.
"There is an added concern as Queensland's constant hot and humid climate produces high demand for air conditioning throughout the summer months, compared to demands spikes related to air conditioning in the southern states.
"Powerlink has forecast demand growth of 3.1 per cent per year on average over the next 10 years, which is a clear indication of the importance of maintaining its infrastructure".
The decision does not extend to the parallel network assets owned and operated by Ergon Energy and Energex, which are the regulatory responsibility of the Queensland Competition Authority.
The ACCC considered submissions from industry and government before bringing down its final decision, which will be effective for five and a half years from 1st January 2002.
*mechanism for the ACCC to regulate the gross revenues of the transmission networks, necessary because electricity transmission is not a competitive activity. If left unregulated, network service providers could charge monopoly prices.