Presented by Robert Clark MP		www.robertclark.net

Regulator General reports on electricity services

Victoria’s electricity distribution businesses generally improved or maintained service levels to customers during 1998, while increasing the affordability of their services, according to the annual Electricity Performance Report released by the Office of the Regulator-General.

These benefits were accompanied by increased profitability by most distribution businesses.

The improvements in profitability also indicate that the overall performance of the businesses is consistent with the objectives of electricity industry reform.

The report compares the service performance of AGL Electricity, CitiPower, Eastern Energy, Powercor and United Energy and includes enhancements on previous reports, including:

• Better analysis of financial performance to facilitate comparisons between the businesses and identify the causes of the rise in profitability (the Office is reviewing the financial reporting obligations of the businesses to ensure that costs are properly allocated between their distribution and retailing arms, to assist it to set new distribution price controls for the period 2001-5).
• Disclosure of the reliability of each of Victoria’s 1604 high voltage feeders, to inform customers of the reliability of supply delivered to their local area.

Reliability of supply, as measured by average minutes off supply, is substantially better than under the SEC prior to 1995, and has generally improved over the period 1995 to 1998. In 1998 the average Victorian customer spent 199 minutes off supply. Profitability, as measured by returns on regulatory assets, has improved over the period 1996-98, with all businesses reporting returns above the levels forecast in 1995.

The Regulator-General, Dr Tamblyn, said that there were important differences between the performance of the businesses:

• Only CitiPower and AGL reported clear gains in both profitability and reliability, with both businesses reporting their best result in overall minutes off supply since 1995.
• United Energy’s considerable reliability improvements in 1998 — minutes off supply fell 32% compared with 1997 — came with a small rise in profitability.
• Powercor’s gain in profitability has been accompanied by stable reliability since 1995, although reliability for 1998 was 7% worse than in 1997, primarily due to widespread storms in March. Reliability in some areas, notably Horsham, has fallen below 1995 levels.
• Eastern Energy has improved its profitability but recorded its worst unplanned minutes off supply result in 1998, even allowing for severe flooding in Gippsland in June and widespread rains and floods in October and November (up 40% compared to 1997).

The report points out that there has been a slow growth in unplanned minutes off supply between 1995-98 that was offset by declining planned minutes off supply (which fell 50% over the three year period and 21% in 1998). It also notes that the frequency with which supply interruptions occur is rising, but their duration is falling.

In general, changes in unplanned minutes off supply and frequency of interruptions have a greater impact on customers than changes in planned minutes off supply and the duration of interruptions. Both trends are being further analysed by the Office.

Dr Tamblyn emphasised that supply reliability is strongly influenced by the nature of each businesses’ distribution network. For example, reliability tends to improve as distribution feeders become shorter, and alternative lines of supply become available, which is more economic in urban areas.

Future performance reports will therefore report separately on CBD, urban and rural supply reliability, to enable more meaningful comparisons to be drawn. Preliminary figures were recently released by the Regulator General’s Office in its recent guidelines to the businesses on the preparation of their submissions to the Office’s distribution price review (available on the Office’s web site).

In their submissions, the businesses will be required to specify reliability targets for 2001-5.

Dr Tamblyn welcomed the general improvement in the affordability of electricity, due to a 14% fall in retail prices between 1994 and 1998, the increased availability of instalment plans, reduced use of refundable advances, and continued overall falls in disconnections for non-payment. However, Eastern Energy recorded its second consecutive rise in disconnections of residential customers.

Independent benchmarking of the businesses’ responses to customer calls to their account lines found that all businesses achieved generally good results compared to interstate electricity companies on key customer service measures, including timeliness and helpfulness of response. The report shows however that complaints increased in 1998, primarily due to United Energy recording a large increase because of the billing problems it experienced during the year.

All the businesses achieved good results in making new connections and keeping appointments on time. Their performance in repairing streetlights on time is mixed, with AGL showing the greatest improvement during 1998.

(News Release, Office of the Regulator-General, July 23, 1999)