On 6 December 2010 the AER published new versions of the roll forward model (RFM) and post-tax revenue model (PTRM) that will apply to future electricity transmission determinations. These models are used to calculate the revenue requirements for a transmission network service provider.
The primary changes have been made to:
- Expand the roll forward calculations to establish a regulatory asset base that recognises capital expenditure on an as-commissioned basis
- Insert a standard approach to roll forward the average remaining asset lives to determine the average remaining asset lives at the end of the regulatory control period.
The AER has also made further enhancements to the models based on the submission received in response to the proposed amendments published in August 2010.
The AER’s final decision on the amendments, handbooks and the models can be found on the AER’s website.
Background
In modelling the revenue requirements for a transmission network service provider the AER uses the PTRM. The PTRM employs certain assumptions, including how capital expenditure (capex) is to be recognised. Capex is recognised under a partially as-incurred approach, where the return on capital is calculated based on as-incurred capex and the return of capital (depreciation) is calculated based on as-commissioned capex. In order to continue with recognising capex under the partially as-incurred approach the AER has amended the transmission RFM and PTRM under clauses 6A.6.1(c) and 6A.5.2.(b) of the National Electricity Rules (NER).