An increased risk of bushfires is being cited by the electricity industry as it starts its campaign against cuts recommended for  power prices in NSW.

The industry is challenging a key component of the Australian Energy Regulator's decision amid warnings the power companies may be forced to slice spending on trimming  undergrowth near power lines.

A meeting of the heads of networks companies has called for the Productivity Commission to review the use of benchmarking in the recent decision.

Late last month the regulator said it intended to cut by as much as 10 per cent electricity bills in 2015-16 following the decision to impose heavy cuts to the budgeted spending of the power companies as well as changing interest rate assumptions.

Advertisement

"The demand for electricity is falling, which puts less strain on the networks and requires less investment to provide a reliable supply of energy," Paula Conboy, the newly installed chairman of the regulator, said at the time. The move is to "ensure that only prudent and efficient costs are recovered from consumers".

NSW energy distributors are the first to be assessed under the new price-setting regime, with South Australian and Queensland networks to follow. A key element of the new approach is a benchmarking program that found the government-owned electricity distributors in NSW are less efficient than operators in other states such as Victoria.

However, the regulator used data not only from Victoria but from New Zealand and Ottawa, Canada, in assessing the efficiency of the NSW operators but with little explanation of the relevance of the overseas data to local conditions.

"The regulator has adopted a cavalier approach to industry consultation," John Bradley, the head of the Electricity Networks Association, said on Monday.

Given its experience with benchmarking, the industry wants the Productivity Commission to review the AER's approach, due to the concern the steep cuts to be imposed on spending will affect network safety and reliability, since industry spending will be cut to levels of more than a decade ago.

In particular, the network companies have warned they would have to slash outlays on vegetation management beneath electricity wires, which could exacerbate bushfire risk.

In a letter to the AER, as well as the head of the NSW Networks, the NSW Rural Fire Service warned the broader ramifications of the AER's pricing decision had not been taken into account.

"I strongly urge the AER to undertake detailed risk assessments of the broader impacts of these determinations," Commissioner Shane Fitzsimmons said.

Fire & Rescue NSW has outlined similar concerns, arguing the lack of vegetation management "could lead directly to greater loss of life and property", its commissioner, Greg Mullins, said in a letter.

A spokesman for the AER said it had no comment to make on the industry's call.