The Federal Court has handed down a decision that will increase electricity prices for NSW customers by around $3 billion.
According to environment and energy minister Josh Frydenberg, this reaffirms the Turnbull Government’s position of wanting to abolish the Limited Merits Review (LMR) process to stop network businesses gaming the system.
The Australian Energy Regulator (AER) had originally agreed to allow the networks to re-coup a much lower number but this was overturned by the Australian Competition Tribunal last year and subsequently upheld by the court yesterday.
The Federal Government has had a clear policy to reform the LMR process but states who own network assets like Queensland and New South Wales have stood in the way of those reforms, according to Frydenberg.
“By blocking attempts to stop network businesses gaming the system, the Queensland and NSW governments have given a green light to higher electricity prices,” he said.
Therefore, the Turnbull government together with the support of Victoria and South Australia has been trying to get the states to agree through the COAG Energy Council to “stop this rort, but self-interest by those looking to increase the value of their assets has hung consumers out to dry,” he added.
“The LMR process is the root cause of today’s decision which will see customers paying more through higher electricity prices. The LMR process allows energy networks to contest decisions of the AER through the Australian Competition Tribunal by appealing how much they can recoup from customers.
“It is the clear view of the Turnbull Government that the AER is best placed to make decisions on how much energy companies can re-coup from customers and not the Australian Competition Tribunal.”
The COAG Energy Council reached a compromise position in December 2016 to reform the appeal mechanism. The Federal Government has called on all states to come together at the COAG Energy Council in July this implement this commitment.