On 5 November 2010, Origin Energy Retail Ltd (Origin Energy) submitted to the Commission a proposal for the price path to apply to SA gas standing contract prices for the period 1 July 2011 to 30 June 2014.
The Commission has now completed its Inquiry under Part 7 of the Essential Services Commission Act 2002 and has published its Final Determination, setting gas standing contract prices for the three year period to 30 June 2014.
Origin Energy Price Path Proposal
On 5 November 2010, Origin Energy Pty Ltd (Origin Energy) submitted to the Commission a proposal for the price path to apply to SA gas standing contract prices for the period 1 July 2011 to 30 June 2014.
Origin Energy is the declared gas retailer in South Australia. A declared gas retailer must, as a mandatory condition of its retail licence, agree to sell gas to a small customer at the standing contract price and subject to the standing contract terms and conditions.
Commencement of Inquiry
In accordance with the requirements of section 34A(4a)(d)(iii) of the Gas Act 1997, the Commission has now commenced an Inquiry under Part 7 of the Essential Services Commission Act 2002 into the appropriate price to be fixed as the gas standing contract price. Such an inquiry must be conducted prior to making a price determination in respect of gas standing contract prices.
The proposed timetable for the Inquiry is as follows:
Timetable
| Action | By |
|---|
| Receive Origin Energy Proposal |
5 November 2010 |
| Release Issues Paper & Origin Energy Proposal |
19 November 2010 |
| 1st round stakeholder submissions due |
17 December 2010 |
| Release Draft Report & Determination |
End March 2011 |
| 2nd round stakeholder submissions due |
End April 2011 |
| Release Final Report & Determination |
June 2011 |
| Determination takes effect |
1 July 2011 |
The Commission has prepared an Issues Paper, which identifies the key issues faced by the Commission in its assessment of the Origin Energy submission. The Commission invites comments on the Origin Energy submission, on the various issues raised in the Issues Paper, or on any other matters that stakeholders consider relevant to this Inquiry. Submissions are sought by 17 December 2010.
Publications
The Commission has received 4 written submissions to the 2010 Gas Standing Contract Price Path Inquiry - Issues Paper.
Submissions
The Commission has released its Draft Inquiry Report and Draft Price Determination on the retail component of regulated gas prices to apply from 1 July 2011 to 30 June 2014. The Commission is only responsible for regulating the retailer component of gas standing contract prices, which comprises approximately 45% of a typical residential standing contract bill. In addition to this component, standing contract prices include Envestra’s distribution charges and the Australian Energy Market Operator’s (AEMO’s) retail market administration charges, both of which are separately regulated and are therefore treated as cost pass-through items to standing contract customers.
The Commission’s Draft Decision to increase gas standing contract prices on 1 July 2011 would add approximately $9 to an average annual residential bill (around 1.5%), assuming that the increase is applied uniformly between tariffs. The initial price rise largely reflects increases of aspects of the wholesale gas cost relating to load factors and provisions for peak demand, along with an increase in retail operating cost allowance.
In making the Draft Price Determination, the Commission has reviewed various key cost components of gas retail services, namely wholesale cost of gas purchases, transmission charges by pipeline operators, retail operating costs and the retail margin. This review was undertaken with reference to a proposed price path put forward by Origin Energy in November 2010, which was released for public consultation. Further, the Commission has had regard to advice from independent experts on each of the cost forecasts.
Based on the Commission's Draft Decision, the maximum average retailer revenue in 2011/12 (in $Dec11) is $13.48/GJ for residential customers and $7.35/GJ for SME customers, representing a 2.5% increase and a 0.9% decrease in real terms respectively. These amounts incorporate a forecast change in CPI of 2.5% in converting prices from $Dec10 to $Dec11 terms, which will be updated for the Commission’s final decision.
The Commission invites comment from interested parties on this Draft Inquiry Report and Draft Price Determination. Submissions are due by 9 May 2011. The Commission will consider submissions, and any further information it gathers in the course of the inquiry, and release a Final Report and Price Determination, incorporating any changes, by early June 2011
Publications
The Commission has received submissions to the 2011 Gas Standing Contract Price Path Inquiry - Draft Inquiry Report and Draft Price Determination.
Submissions
The Commission has today released its Final Price Determination in respect of the standing contract prices which Origin Energy Retail Ltd (Origin Energy) will be allowed to charge its South Australian gas standing contract customers over the next three years (1 July 2011 to 30 June 2014).
The standing contract is the retail gas contract that Origin Energy must offer to all South Australian small customers (customers consuming less that 1TJ per annum). Less than 30% of all small gas customers now use the standing contract as the majority of customers have elected to switch to a market contract.
Based on the Commission's Final Price Determination, a typical residential customer on the standing contract consuming 21GJ per annum would on average experience an overall annual price increase of $84 from 1 July 2011. This increase comprises both an increase in network prices, set by the Australian Energy Regulator, of $66, and an increase in the retailer component, set by the Commission, of $18. The Commission's Final Determination focuses on the retail element of the bill, which accounts for approximately 45% of the total bill and will see the retail element of prices for both residential and small business customers moving in line with inflation (CPI) in the second and third years of the period.
In making the Final Price Determination, the Commission has reviewed the various key cost components of gas retail services, namely wholesale gas costs, transmission costs, retail operating costs and the retail margin. This review was undertaken with reference to a proposed price path put forward by Origin Energy in November 2010, which was released for public consultation. Further, the Commission has had regard to advice from independent experts on each of the cost forecasts.
Publications
