The AER is seeking views from stakeholders on the process it will use to review its Rate of return guideline.
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.
This consultation provides an important opportunity for stakeholders to input into how we will review the Rate of return guideline.
Estimating the rate of return is a technical and complex process which can make it difficult for stakeholders to participate. In seeking views on our proposed approach, we are seeking to make the process more accessible, transparent and collaborative. This, in turn, will promote confidence in our guideline.
We invite stakeholders to provide submissions on our consultation paper by Monday 28 August 2017.