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SP AusNet (SPN) expressed its disappointment with the Australian Energy Regulator’s (“AER”) draft price determination for Victoria’s electricity distribution businesses for 2011-2015, which was released last Friday. The company said the AER reduced SP AusNet’s proposed capital expenditure by 30.5% and operational expenditure by 24.2% in its draft determination.

The diversified energy infrastructure business said if endorsed the reduction would significantly limit SP AusNet’s plans to secure, maintain and grow its network to meet anticipated consumer demand over the next five years.

Managing director, Nino Ficca, said the draft determination failed to acknowledge the robust analysis and economic modelling that underpinned SP AusNet’s submission.

“Our submission reflects the changing needs of the electricity distribution sector over the next five years, driven by increasing peak demand, the need for investment in infrastructure replacement and ensuring reliable and safe supply to Victorian consumers,” Mr Ficca said.

“Our analysis is also based on our experience of the current regulatory period, during which we invested 30 per cent more ($225 million) than that provided by the regulator.”

Mr Ficca expressed disappointment in a process that he said appears to have created inconsistency between Victoria and the AER’s recent decisions in other states.

“If confirmed in the AER’s final determination, this would mean substantially less investment in Victoria, compared to other states,” he said.

“This inconsistency is difficult to comprehend. The maintenance and replacement requirements for existing infrastructure in Victoria are similar to those in the other states.”

Mr Ficca added that the Victorian population growth is creating further demand for new network investment.

“In particular, business and household connections in SP AusNet’s distribution network are expected to increase by around 68,000 in the coming five years,” he said.

“If the investment required over this period is not planned now, this will simply impact our ability to meet consumer demand and create greater and unplanned price increases down the track.”

As at 1428 AEST, SP AusNet shares were down 2c to 81c.

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