Electricity transmission and distribution network businesses are required to submit revenue proposals to the AER every five years outlining how much they intend to recover from consumers. The AER assesses these proposals to ensure consumers pay no more than necessary for safe, reliable and secure electricity services.
AER Board Member Lynne Gallagher said the AER’s final decisions aim to strike a balance between keeping costs affordable for consumers and ensuring networks can invest in the capital and operating expenditure needed to support the evolving energy system.
“We have carefully considered all submissions and feedback from stakeholders and reviewed the proposed expenditure to ensure that it is clearly justified, timely and efficient,” Ms Gallagher said.
“Following our assessment, we have either accepted, rejected or in some cases, identified other solutions to address consumers’ concerns and deliver the outcomes they were seeking at a lower cost.”
Flexible trading arrangements rule change
The Victorian energy market is undergoing a complex transition with changes in household and commercial energy use. The system is evolving with the integration of consumer energy resources (CER), new loads such as data centres, and increased focus on the reliability and resilience of electricity networks following outages caused by bush fires and severe weather events.
In response to this shifting landscape, networks proposed significant increases in revenue for the 2026-31 regulatory period, to support investment in new capacity and replace ageing assets. The underlying costs of running the network, and market factors such as rising inflation and interest rates have also driven higher revenues for networks in today’s decisions compared to the current regulatory period.
$16.3 billion cost pass through for Victorian DNSPs
The final decisions allow AusNet to recover $4.7 billion, Jemena to recover $2 billion (USD 1.4 billion), CitiPower to recover $2.03 billion, Powercor to recover $5.3 billion, and United Energy to recover $2.3 billion for the 2026-31 regulatory period.
Like the Victorian DNSPs, the Australian Capital Territory’s network operator Evoenergy saw $1.51 million approved to be recovered over 2026-2029 financial years.
While the 30 April 2026 decisions don’t set the impacts on customer’s electricity bills, high level estimates indicate a likely average annual decrease of $6 – $38 in the distribution component of Victorian residential electricity customers’ bills across 2026-31.
This is because, even with the increase in approved revenue, forecast higher demand would result in the increases being shared among more customers, leading to lower bills than in the current period. Whether bills continue to fall in the later years of the regulatory period will depend on whether the increases in demand are realised.
The decisions include a combined $119 million across the networks to support initiatives for network and community resilience during and after extreme weather events, and over $112 million in new investment to improve network reliability.
With these costs ultimately borne by consumers, Ms Gallagher reinforced the importance of networks effectively using their existing infrastructure to its full capacity.
“It’s critical that network businesses get the most out of the network we already have and look at alternative, non-network solutions where possible so that consumers only pay for targeted investment where and when it’s needed,” said Ms Gallagher.
The decisions also support networks to integrate CER such as rooftop solar which can have benefits for all consumers through lower wholesale electricity costs, lower networks costs and lower carbon emissions.
“We have approved a combined $199 million across the networks to better integrate consumer energy resources and introduced pricing options that reward customers who make the most of their energy when it is available and reduce the impact on the network.
“Our decisions also help ensure data centres are paying their own way when connecting to the distribution network. This includes paying for both the direct cost of connection that is only used by the data centre, and a fair portion of the shared distribution network costs.
“We will continue to focus on improving consumer outcomes and ensuring the regulatory framework works for all consumers, including those who are vulnerable and at risk of being left behind as the transition progresses,” said Ms Gallagher.
The final decisions will come into effect from 1 July 2026, with network businesses to decide how and when to implement the solutions and spending the AER has approved.
Other regulatory changes
Jemena separately applied to pass through incremental costs arising from the Australian Energy Market Operator’s (AEMO’s) Market Interface Technology Enhancements, the AEMC’s Accelerating smart meter deployment rule change, and the October 2025 Victorian Emergency Backstop Mechanism 2 (VEBM 2) Ministerial Order.
The AER’s decision is to approve the following cost pass through amounts, also to be recovered in 2026–27:
- AEMO’s Market Interface Technology Enhancements – $0.67 million
- Accelerating smart meter deployment – $0.16 million
- VEBM 2 Ministerial Order – $0.74 million.
Natural Disaster Event
Energex submitted a cost pass through application seeking to recover incremental costs incurred due to Tropical Cyclone Alfred. The AER’s decision is to approve a cost pass through amount of $66.1 million. This decision will allow Energex to recover these costs across the 2026-27 and 2027-28 regulatory years.
Background
A cost pass through application allows network businesses to recover efficient costs, not accounted for in current revenue determinations, associated with certain specified events such as changes in regulatory obligations or service standards, and natural disaster events.
Under the National Electricity Rules, the AER is required to assess cost pass through applications from network businesses where such events result in a material change in the cost of providing services. In making our assessments, the AER has regard to relevant factors in the National Electricity Rules and seeks to ensure that consumers pay no more than necessary for safe and reliable energy.
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