ActewAGL says Canberra's electricity supply will be at risk, the utility's staff numbers will be "slashed and burned" and executives pay reduced by 40 per cent because of the regulator's draft revenue reduction, back dated to July this year.
But under the proposal, electricity customers will save an average $162 a year on their power bills.
Chief executive officer Michael Costello says the draft decision from the Australian Energy Regulator does not make sense, and could lead to catastrophic failure of a zone substation, similar to what happened in Darwin, where the city was left without power.
"ActewAGL currently has the cheapest and most reliable network in regards to unplanned blackouts in Australia and yet the AER decision says we are less efficient than other utilities," Mr Costello said.
ActewAGL says the average customer will save $3.12 a week . Mr Costello says the operational expenditure part of that saving will be $1.60 a week but will affect reliability, safety and security of the ACT network.
"In future, when there is a big storm in the city and the power goes out, with a dramatically reduced workforce, which it will be, we will not be able to bring the power on any more quickly, it could be late the next day or the day after," Mr Costello said.
The amended charges are in draft form, subject to further submissions and will apply from July, 2015.
"We not objecting to a reduction in price," Mr Costello said. "What we are objecting to is the degree of the reduction, and the fact it threatens reliability, stability and, if it does go far enough, the safety of the network."
Mr Costello said the regulator had not calculated the cost of many redundancies, or backdating an expenditure allowance reduction to July 2014 to June 2019, which added together would total a 60 per cent cut
"I mean, the ABC has had a 5 per cent cut and the whole world has blown up over it. We've had a 41 per cent cut and what will effectively be a 60 per cent cut, just make a judgment. This is like asking the federal public service, after all cuts to date, to cop another 50,000 cuts in three months."
In setting the draft expenditure allowance, the regulator rejected ActewAGL's proposed revenue allowances.
AER chair Paula Conboy says under new rules the regulator's focus is squarely on outcomes for energy consumers, for a safe and reliable network.
Ms Conboy says Victoria and South Australia electricity businesses could provide lower costs for similar services provided by NSW and the ACT.
"So we have to ask ourselves, why should customers be required to pay more?" she said.
ActewAGL's revenue allowances were rejected in part because of a lower rate of return and corporate tax allowance, consistent with AER's rate of return guideline and recent market trends, Ms Conboy said.
Mr Costello says after AER's benchmarking model for assessing operational and capital expenditure was found in August after consultation to be unstable and unreliable.
"They spent the next few months with new models, they rushed them out with chewing gum, sticking tape and Band-Aids to put it all together again. It still doesn't reflect reality. They didn't consult on new models, they didn't consult with us," Mr Costello said.
ActewAGL employs 850 people for distribution and retail. The staff engaged on the network side is about 460.
"We will have to absolutely slash and burn those numbers. We have to do work [on staffing], I am not going to say anything about numbers until I talk to workforce in the afternoon," Mr Costello said.
"The real worry, risk builds over time in a network, when you don't replace ageing infrastructure, problems will manifest themselves in catastrophic failure of a zone substation, of the kind that happened in Darwin, when the whole city went out."