Australia’s Victorian state government has announced its decision on increases in electricity and gas tariffs as sought by Origin Energy, AGL and TXU. These tariffs apply only to residential and business customers who have not accepted a competitive market offer.

Origin had sought a CPI based increase of 3.1% on the relevant revenue base of approximately $1.2bn, across both gas and electricity.

The government has rejected the proposed tariff increase for gas, for electricity supplied to customers in the former Powercor area and has sought a 4% tariff reduction to customers in the former CitiPower area. This decision will impact Origin’s total retail revenue by less than 0.5%.

Grant King, Origin’s managing director, said: “The primary difference between tariffs sought by the company and those approved by the government relate to the projected cost of purchasing gas and electricity for resale by the company with the government receiving advice that recent reductions in wholesale power prices will result in significant margin growth for retailers under existing tariffs.

“The company has now received the advice upon which the government has based its decision and is reviewing this prior to further discussions with government in the New Year. We expect any discrepancies or errors will be addressed in the final gazettal process.

“As part of the tariff review, the government has allowed continued rebalancing of tariffs to occur subject to a deviation of no more than 5% for individual tariff categories. Consistent with the government’s decision, the company will continue to rebalance tariffs and expects that there will be reductions in tariffs to customers who have been receiving competitive market offers whilst non-profitable segments of the market will continue to have their tariffs adjusted on a gradual basis.

“The company therefore expects that this tariff review will have minimal impact on profitability.”