The AER today released an issues paper on equity beta as part of its consultation for developing the rate of return guideline. The guideline is part of our Better Regulation program and will set out how we intend to apply the new rules framework to set rates of return for electricity and gas service providers, in order to promote the long term interests of consumers.
The equity beta is an important component of the rate of return. This issues paper sets out our proposed approach to estimating the equity beta. Applying this approach, we propose to adopt an equity beta of 0.7, chosen from within a range of 0.4 to 0.7. In previous decisions, since our 2009 weighted average cost of capital (WACC) review, we have adopted an equity beta of 0.8.
Invitation for submissions
Interested parties are invited to make written submissions to the AER regarding this issues paper by the close of business, 28 October 2013. This timeline extends past the date for submissions on the draft guideline (11 October 2013), and applies only for submissions that relate specifically to equity beta issues arising directly from this issues paper.
Submissions should be sent electronically to: rateofreturn
aer [dot] gov [dot] au. Alternatively, submissions can be sent to:
Mr. Warwick Anderson
General Manager—Network Regulation Branch
Australian Energy Regulator
GPO Box 3131
Canberra ACT 2601
We will take into account submissions on both the rate of return draft guideline and this equity beta issues paper in making our rate of return final guideline, to be released in mid-December 2013.
We prefer that all submissions be sent in an electronic format in Microsoft Word (or another text readable document form) and publicly available, to facilitate an informed, transparent and robust consultation process. Accordingly, submissions will be treated as public documents and posted on our website, unless prior arrangements are made with us to treat the submission, or portions of it, as confidential. Those wishing to submit confidential information are requested to:
- clearly identify the information that is the subject of the confidentiality claim; and
- provide a non-confidential version of the submission