Australian Energy Regulator releases Final Report on Value of Customer Reliability Review

On 18 December 2019, the Australian Energy Regulator (AER) released the Final Report on its Value of Customer Reliability (VCR) Review.

VCRs seek to reflect the value that different types of customers place on the reliable supply of electricity. This is of course important since outages not only cause lost productivity and revenue, but also a reduction in convenience, comfort, safety and amenity. However, reliability also requires network investment which is paid for ultimately by consumers through network charges. There is therefore an inherent tradeoff between reliability and cost, with VCRs estimating how much customers are willing to pay for a specified level of network reliability.

The AER’s Report sets out the VCR values for unplanned (standard outages) of up to 12 hours in duration for both the National Electricity Market and the Northern Territory. This report details the largest VCR study ever conducted in Australia, with over 9,000 residential, small business and industrial energy customers completing the survey.

The Melbourne Energy Institute (MEI) was commissioned to provide expert services to assist the AER with this VCR Review. The commissioned work included advice on the design of customer surveys, advice on various technical and statistical matters, and quality assurance of the results.

MEI assembled a multidisciplinary team from the University to undertake this work, including

• Professor Ian Gordon and Professor Graham Hepworth, Department of Mathematics and Statistics;
• Professor Pierluigi Mancarella, Department of Electrical and Electronic Engineering;
• Dr Veronika Nemes, Department of Economics.

MEI also engaged the services of an eminent econometrician, Professor Kenneth Train, from the University of California at Berkeley.

Professor Michael Brear, Director of the MEI, said “the AER is to be congratulated on this Review. Importantly, the methodologies used throughout this project were systematically and openly discussed and improved with stakeholders, and the results were obtained transparently and with a sound evidence base.”

This is the second time that MEI has made a substantial contribution to an important National process in recent years, having previously been commissioned by the Finkel Review to analyse the security of the National Electricity Market (NEM).

“MEI’s ongoing commitment to deep and focused research in the energy sector is not just about education, discovery or commercialisation. Doing our best research every day also means that we are always ready to provide high quality analysis and advice to industry and government. MEI is able to garner these resources when our partners need them.”

Complete details on the VCR Review are available at the AER website.