ENERGY PRICES

Mr HAMILTON-SMITH (Waite) (14:53): My question is to the Minister for Energy. Are householders and businesses across the state facing a 14.5 per cent increase in their gas bills in coming weeks, and what are the reasons for this significant spike in charges?

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Transport and Infrastructure, Minister for Mineral Resources and Energy, Minister for Housing and Urban Development) (14:54): On 22 July of this year, The Advertiser published an article entitled 'Anger as gas retailers lift prices' in South Australia. It is reported that retailers will be increasing the price of gas to small customers between 12 to 13.5 per cent from 1 August 2013. Retailers are claiming that the increase is as a result of increased wholesale gas costs and increased network charges. The retail price increases reported by retailers in South Australia are consistent with the magnitude of the network price increases from 1 July 2013. Network charges only represent about 65 per cent of the price of gas.

In February of 2012, after a successful appeal to the Australian Competition Tribunal, Envestra's distribution tariffs for the period of 1 July 2012 to 1 July 2016 were set in accordance with the following table. From 1 July 2012, CPI plus 8 per cent was determined by the AER, and the tribunal varied that allowable increase by 15.83 per cent plus CPI. From 1 July 2013, CPI plus 8 per cent was the AER's determination.

The tribunal, on appeal, varied the allowable increase by CPI plus 15.83 per cent. From 1 July 2014, the AER determined the allowable increase as CPI plus 7 per cent. The tribunal, on appeal, varied that by CPI plus zero per cent. From 1 July 2015, the AER (the Australian Energy Regulator, that is) determined CPI plus 6 per cent. The tribunal varied the allowable increase by zero per cent.

The table above reflects that Envestra has been allowed two large tariff increases of CPI plus 15.83 per cent in each of the 2012 and 2013 financial years. The increases in Envestra's network charges are largely driven by higher financing costs than in the previous five-year period and large mains replacement programs to replace old leaking cast iron pipeline. For 2014-15 and 2015-16, Envestra has only been allowed to increase its distribution tariffs by CPI. Thus, retail price rises of this magnitude will not be expected in these years.

The wholesale cost represents around 10 per cent of the price of gas. The South Australian gas market operates under a contract carriage model, whereby retailers contract directly with gas producers, transmission pipeline operators and distribution network operators in the supply of gas to end users. These contracts are generally confidential and, therefore, to the extent of any price increases faced by a retailer in respect to wholesale gas, cost is unknown.