Prices out of whack as profits beat goals

Prices rise, profits beat goals and service levels decline. Photo: Louie Douvis

So who's having a lend of whom? Victoria's electricity distributors are earning much higher profits than anticipated, as customer service levels have, for the most part, declined.

Part of their gains was good management, with tight cost control.

But a large part came from higher-than-expected revenues which enabled them to post much higher-than-anticipated returns for the fifth straight year. That in turn, signals the way spending is approved - which impacts prices paid by households and businesses - is out of whack.

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In its annual review, the Australian Energy Regulator, an arm of the Australian Competition and Commission, found returns on regulated assets of the five distributors is as high as 10 per cent. In these present difficult economic times, that is the sort of return many businesses would love to achieve, especially in a regulated sector.

The review covered the performance of electricity distributors such as CitiPower and Powercor in 2010.

It also disclosed an improvement in power supply, which was largely thanks to less extreme weather than in the previous year.

Singaporean-owned Jemena was easily the most profitable of the five, earning a 10 per cent pre-tax return on its distribution sector assets, followed by Powercor with 9.9 per cent, CitiPower's 8.8 per cent and United Energy with 8.5 per cent.

The laggard was SP AusNet with 6.9 per cent.

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Prices out of whack as profits beat goals