Gas Week

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NSW price regulator plans price-cap – at standard retail rate – for small city off-grid stand-alone generation

Posted by gasweek on 25 September, 2007

IPART – the NSW Independent Pricing and Regulatory Tribunal, commenting on the GridX Power Pty Ltd – retailer supplier licence application said GridX had argued that competition in the distributed generation field was likely to provide a real benefit to developers and customers. GridX was prepared to have its prices capped to the bundled tariff charged by the standard retail supplier in the relevant local distribution area.

How the off-grid rate might apply: The Tribunal notes that similar price caps were applied via regulation to the charges levied for supplying residential customers by exempt retailers in similar monopoly supply situations. A similar approach could be taken to charges levied on customers connected to islanded networks, but a more practical solution would be to include a similar price cap provision as a licence condition.

How to circumvent a price cap: But IPART mused;

• GridX would be able to circumvent a price cap placed on electricity supply, by increasing the price of its unregulated hot water supply services; and

• any price cap linked to standard supply tariffs would need to be redesigned if the current form of price regulation was removed.

Does price cap defeat national plan?: Australian Energy Ministers had agreed to phase out price regulation where there was “effective competition’, but IPART planned the off-grid urban-gen price cap for islanded networks for these reasons:

• because electricity is an essential service;

• customers may be able to more readily reduce their hot water demand if transfer pricing as outlined above was applied.

Extra licence condition: The additional licence condition was that the price cap be limited to applicable standard supply tariff…unless otherwise approved by the Tribuna.

Reference: Independent Pricing and Regulatory Tribunal, GridX Power Pty Ltd – retailer supplier licence application. Electricity Licensing – Consultation Paper, May 2007. Inquiries regarding this document should be directed to a staff member: Gary Drysdale Phone: (02) 9290 8477 Email: gary_drysdale@ipart.nsw.gov.au Website: http://www.ipart.nsw.gov.au

Erisk Net, 21/8/2007

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