Regulated Price Determination Fact Sheet The Office of the Tasmanian Economic Regulator (OTTER) is currently undertaking an electricity retail price investigation that will determine the standing offer prices in Tasmania for the next three years. Most Tasmanian electricity customers (97% households and 84% small businesses) are on ‘standing offers’, also known as regulated prices. All other customers are on ‘market offers’. Aurora Energy’s residential customers and most businesses are charged regulated prices. The final price determination from OTTER will set the electricity prices for households and small businesses over the next three years. As market offers tend to closely track Aurora’s regulated prices, reductions in regulated prices due to lower costs are likely to be matched by lower market offers, leaving all Tasmanian residential and small business customers the beneficiaries, not just regulated customers. For more information on how Tasmanian electricity prices are determined, visit the OTTER webpage. The advocacy groups contend that when benchmarked with recent Australian Competition and Consumer Commission (ACCC) data: •
Aurora’s costs are too high and have not fallen as quickly as retailer costs on the mainland — they should be around $125-$140 per customer, much lower than Aurora’s revised proposal of $168.60 and OTTER’s draft finding of $156.42 per customer.
This would deliver average savings to customers of $7.7–$11.7 million compared with Aurora’s ask and $4.4-$8.5 million compared with the OTTER draft finding. •
Aurora’s retail margin is set too high when taking into account the local factors and risks Aurora is exposed to, as well as the advantages of being a government-owned business with dominant market share.
The ACCC has estimated mainland retailer margins at $49 per customer (3.4% margin), less than half of Aurora’s revised proposal of $105.80 (5.4%) and well below OTTER’s draft finding of $96.25 (5.25%) per customer. An average margin of $70-$82.50 per customer would save Tasmanian customers $6.3-$9.7 million compared with Aurora’s ask and $3.7-$7.1 million compared with the OTTER draft finding. •
Aurora is seeking $3.8 million per annum from customers to provide its aurora+ app, compared with the $1.5 million per year it currently earns from fee-paying customers. Other energy retailers in Tasmania and on the mainland provide free access to their apps as a service offering and to reduce business costs.
Aurora also benefits from greater customer digitisation through improved bill payments, lower levels of customer debt, cost savings driven by digital efficiencies and customer retention.
3/86 Murray Street, TAS, 7000 GPO Box 771, Hobart, TAS, 7001 p (03) 6169 9500 ABN 69 078 846 944
The following table summarises the proposed allowances: Component
Aurora Energy Preliminary Submission
Regulator Draft Determination
Aurora Revised Submission
TasCOSS/TSBC Draft Determination Submission
COTA Tasmania Draft Determination Submission
Base CTS
$155.21
$142.27
$154.45
$130-$140
$125-$129
$17.33
$14.15
$14.15
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Total CTS
$172.54
$156.42
$168.60
$135 (av.)
$127 (av.)
Retail Margin
$111.94
$96.25
$105.80
$82.50
$70 (av.)
Total Allowance
$284.48
$252.67
$274.40
$217.50
$197
Average per customer saving on Aurora’s proposal
$56.90
$77.40
Total average savings compared with Aurora
$15.4 million
$20.9 million
Average per customer saving on Regulator’s proposal
$35.17
$55.67
Total average savings compared with Regulator
$9.5 million
$15 million
aurora+
3/86 Murray Street, TAS, 7000 GPO Box 771, Hobart, TAS, 7001 p (03) 6169 9500 ABN 69 078 846 944