The Economic Regulation Authority intends to knock back ATCO’s five-year plan for its gas distribution system that delivers to more than 800,000 households in the state.
The Economic Regulation Authority intends to knock back ATCO’s five-year plan for its gas distribution system that delivers to more than 800,000 households in the state.
The ERA today released its draft decision for ATCO Australia’s access arrangement plan for its Mid West and South West gas distribution system that services Perth, Kalgoorlie, Geraldton and the South West.
ATCO's network changes would make up around 30 per cent of the average household gas bill, according to the ERA.
In its draft decision, the ERA has not approved ATCO’s expenditure forecast and its plan to recover $80 million in accelerated depreciation over the next five years.
ERA chair Steve Edwell said ATCO’s proposals were not feasible under the regulatory framework.
“And even if they were permitted under the framework, ATCO has not demonstrated that these are the most cost-efficient and prudent solutions to reduce emissions,” he said.
ATCO also proposed a 12.5 per cent increase in the gas network bill for the average customer from January 1 2025, and inflation-only increases over the next four years.
This is on top of ATCO’s proposed one-off tariff increase of 42 per cent in 2025.
Mr Edwell said the state government set the maximum retail gas price for small business and household customers.
“Following the final decision, it will be up to gas retailers to decide if or when they pass on these network tariff increases to customers,” he said.
The ERA has not approved ATCO’s proposal to spend $26.4 million to reduce its own or its customers’ carbon emissions.
ATCO claims the outlook for pipeline operators was uncertain in the longer term and aims to manage the uncertainty by recovering its investment sooner through accelerated depreciation, according to ERA's draft decision.
“Although ATCO has proposed to maintain a similar level of pipeline maintenance and other programs to the previous access period, these activities are taking place in a higher cost environment, including higher interest rates and inflation,” Mr Edwell said.
“Generally, accelerated depreciation is a reasonable regulatory tool to manage uncertainties around future pipeline use and customer demand.
“However, ATCO’s proposal for accelerated depreciation is not robust and not supported by strong economic modelling, and so does not justify the effect this proposal would have on consumers through higher prices.”
In its draft decision, the ERA said ATCO could submit a revised proposal.
The final ERA decision is expected to be published in November.
