Victorians face gas price hikes

GAS distribution charges are forecast to climb by $80 for some Victorian households over the next five years.

But others will be spared a higher cost of living crunch amid claims energy giants have been gouging customers by providing inflated forecasts of the amount of money needed to upgrade networks.

The nation's energy regulator has stripped $1.1 billion from network and transmission companies' original proposals, ruling their demands for cash were unjustified.

In an Australian Energy Regulator decision released this morning, distribution prices for residents in the Envestra zone, which covers Melbourne's outer east, Sale and Albury-Wodonga, are tipped to rise $16 annually over the next five years. This is mainly due to inflation.

But residents in the SP AusNet area in the west will get some much needed relief, with fees likely to fall $5 each year.

And a distribution price freeze has been ordered for those in Multinet region in Melbourne's inner and outer east, Yarra Ranges and South Gippsland.

APA GasNet transmission charges, which cover all customers, are also tipped to fall about $5 a year.

Gas distribution and transmission charges make up 40 per cent of a typical household bill. Wholesale and retail costs make up the rest.

The decision takes effect from July 1 this year.

The AER says its revised pricing framework puts more scrutiny on expenditure requests to "ensure that customers do not pay higher prices than necessary".

"For all businesses except Envestra, the final decisions will result in lower tariffs ... All other things being equal, if retailers pass these lower tariffs on to end consumers, gas bills will go down," the AER decision notes.

"However, whether consumers actually get a real decrease in their bill will depend on various things including what happens to the wholesale price of gas."

Today's ruling follows a performance report released this week revealing customers had been overcharged tens of millions of dollars in recent years for pipe upgrades that were not undertaken.

The AER found distributors reaped $120 million more in returns than forecast for 2009-2011, mainly due to underspending on replacement pipes.

"The gas distribution businesses spent significantly less on their mains replacement program than the allowance provided for in the 2008-12 period."

The AER said Multinet replaced less than half of the kilometres of pipes previously approved by the regulator.

"This underspend meant that consumers, through the prices charged by the businesses, paid for pipeline replacement that was never delivered."

karen.collier@news.com.au

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