The Essential Services Commission of SA (the Commission) has released its decision in respect of the standing contract prices which AGL South Australia Pty Ltd (AGL SA) will be allowed to charge its South Australian electricity standing contract customers from 1 August 2011 to 31 July 2012.
The standing contract is the retail electricity contract that AGL SA must offer to all South Australian small customers (customers consuming less that 160 MWh per annum). Less than 30% of all small electricity customers now use the standing contract, as the majority of customers have elected to switch to a market contract.
The Commission’s electricity standing contract price determination comprises network and retail costs. Network costs consist of ElectraNet’s transmission tariffs and ETSA Utilities’ distribution tariffs, and comprises approximately 40% of a typical residential bill. The retail costs make up the remaining 60%, and include the cost of energy and retail operating costs.
In making its decision, the Commission has utilised a new methodology for fixing standing contract prices, in which the regulated price is adjusted annually based on the weighted average movement in market contract prices. Under this new Relative Price Movement (RPM) methodology, standing contract prices will be allowed to move in line with changes in market contract prices, subject to prices sitting within a predetermined floor and ceiling established by the Commission.
Based on that movement, the Commission has determined that electricity standing contract prices will increase by 17.44% from 1 August 2011. The vast majority of this increase can be attributed to the increase in network prices that took effect on 1 July 2011. Network price increases and a CPI adjustment, together account for an increase in the standing contract price of around 14%. Network prices are regulated separately by the Australian Energy Regulator; the Commission treats network prices as a pass-through to the standing contract price.
For the average householder using 5,000 kilowatt hours of electricity per year, and who is on the AGL SA standing contract, the price change will lead an overall annual bill increase of around $226 from 1 August 2011.
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