The Economic Regulation Authority has knocked back Western Power's request to allow big increases in the price it charges for access to the state's main electricity grid for the next three years.
In its draft ruling on proposed revisions to access arrangements for the South West Interconnected System, the ERA today ruled that the State's primary electricity distributor could only increase transmission and distribution charges by an average of 12 per cent per year.
The ruling allows Western Power's revenue to increase to $795 million this financial year, rising to $1.15 billion in 2011/12 - a full third less than Western Power had requested.
Had Western Power's request been approved, real transmission charges would have risen 42.2 per cent, while distribution services charges would have risen by 32.2 per cent, the regulator said.
The ERA's ruling allows Western Power a pre-tax real rate of return of 7.06 per cent on its capital base, compared to the 8.95 per cent rate requested by the power distributor and 6.76 per cent under the current access arrangements.
The ERA also refused to allow $474 million of the $2.58 billion in capital investment made by Western Power since 2006 to be reflected in the new tariff structure.
Similarly, the ERA excluded $970 million in forecast capital costs and $240 million in operating costs when calculating Western Power's allowable returns.
ERA chairman Lyndon Rowe said the approved cost forecasts would still allow for real increases in network capital investment of $1.4 billion, or 54 per cent more than the investment levels from 2006/07 to 2008/09.
For operating costs, the Authority had allowed a real increase of $138 million, or 14 per cent more.
"The increases allowed by the Authority take into consideration the need for continued improvements in service standards and network reliability," Mr Rowe said.
However, the ERA said the effect of the ruling on the cost of electricity to retail customers was uncertain, and would depend on the extent to which the state government allowed electricity retailers to pass on the full increase in network charges.
The SWIS distributes electricity to more than 840,000 residential and business properties stretching from Kalbarri to Kalgoorlie and Albany, including Perth.
Interested parties have until August 13 to make submissions on the ERA's draft ruling.
