AER commences review of regulatory tax approach

The Australian Energy Regulator (AER) has today released an issues paper on its approach to estimating tax for regulated energy networks.

The amount of tax a network business is expected to pay each year is considered by the AER, along with its expected capital, operating and financing costs, when it sets revenue allowances for regulated electricity and gas networks. The AER determines the expected cost of corporate tax in accordance with the relevant legislation—that is, the National Electricity Rules (NER) and the National Gas Rules (NGR).

Preliminary advice from the Australian Tax Office (ATO) identifies a number of drivers causing an apparent material discrepancy between the tax allowances set by the AER and the actual tax payments made to the ATO by the regulated networks. The ATO advice is available on our website.

The AER will investigate the difference between tax allowances and tax payments, including using its information gathering powers if necessary. The AER will examine the drivers identified by the ATO and consider how they might be addressed. Options may include amendments to how the AER regulates the tax aspects of its revenue determinations and/or proposed changes to the NER and NGR.

The Hon Josh Frydenberg, Federal Minister for the Environment and Energy, has asked the AER to provide an initial public report in June 2018, and a final report and recommendations on any changes required by December 2018. The letter from the Minister is available on our website.

This review will help ensure that energy consumers pay no more than necessary for the safe and reliable delivery of electricity and gas services.