The AER has changed the date for the draft decision on a rate of return guideline from late May 2018 to late June 2018.
We have also extended the date for submissions on our discussion papers and concurrent evidence sessions from 20 April 2018 to 4 May 2018.
This change to the draft decision and submissions deadline was the result of stakeholder consultation, where a number of stakeholders suggested a later draft decision deadline to allow greater consideration of relevant material.
Background
Our rate of return guideline (Guideline) sets out the approach by which we will estimate the rate of return, and comprises the return on debt and the return on equity, as well as the value of imputation credits. The rate of return is a significant driver of regulated revenue.
On 31 October 2017, we released an issues paper requesting views on whether our current approach to setting the allowed rate of return remains appropriate. This issues paper follows a consultation paper we published in July 2017, which sought views on how we could best run the Guideline review process, and a pre-issues paper public forum we held on 18 September 2017. On 28 November 2017, we released our positions paper on the process for reviewing the Guideline. On 28 February 2018 we released three discussion papers on matters to be discussed at our first concurrent expert evidence session, which was held on 15 March 2018.
The AER determines the amount of revenue that electricity and gas network businesses can recover from customers for the use of their networks. A key component of this allowed revenue is the ‘rate of return’. This is a forecast of the cost of funds a network business requires to attract investment in its network. It enables network businesses to obtain necessary funds from capital markets to fund capital investments and service the debt they incur in borrowing the funds. The rate of return makes up approximately 50 per cent of a network business’ allowed revenue. It therefore is a key driver of the amount of network charges that consumers pay.