The Australian Energy Regulator (AER) has published a draft guidance note on how it will assess the impact of capitalisation differences (how costs are allocated) on its electricity distribution benchmarking.
This follows the Consultation paper released in November last year.
Our draft guidance maintains that there are material differences in capitalisation practices between Distributed Network Service Providers, which over time, are having a material impact on our benchmarking results.
Following stakeholder submissions and further analysis, our preferred approach to address these differences has changed from that proposed in the Consultation paper.
Our preferred approach now is to benchmark on the basis of allocating a fixed proportion of overhead expenditure to operating expenditure (opex) for benchmarking purposes. This approach focuses on a known, measurable and material source of capitalisation differences (overheads) and does not inadvertently account for factors unrelated to capitalisation practices, or those already accounted for in our benchmarking methodology.
In addition to seeking views on our new preferred approach to addressing capitalisation differences, we are interested in stakeholder feedback around implementation issues with our preferred approach. This includes which overheads and cost allocation methods should be used as the basis for the benchmarking opex series.
Invitation for submissions
We invite submissions to our draft guidance note by 23 December 2022.
Submissions should be emailed to AERInquiry
aer [dot] gov [dot] au (AERInquiry[at]aer[dot]gov[dot]au) with the subject line: Attn: Arek Gulbenkoglu, General Manager – Network Expenditure – Submission on the impact of capitalisation on the AER’s benchmarking.
Alternatively, written submissions can be sent to:
Arek Gulbenkoglu
General Manager
Network Expenditure
Australian Energy Regulator
GPO Box 520
Melbourne, VIC, 3001
We prefer that all submissions be publicly available to facilitate an informed and transparent consultative process. We will treat submissions as public documents unless otherwise requested. All non-confidential submissions will be placed on the AER's website. For further information regarding the AER's use and disclosure of information provided to it, see the ACCC/AER Information Policy.
We request parties wishing to submit confidential information:
- clearly identify the information that is the subject of the confidentiality claim
- provide a non-confidential version of the submission in a form suitable for publication.