The Australian Energy Regulator today made final decisions on guidelines to assist with its regulation of electricity transmission network businesses. The guidelines, first issued for public comment in January 2007, are the result of significant work by interested parties and the AER.
"The guidelines form an integral and important part of the way the AER regulates electricity transmission networks," AER Chairman, Mr Steve Edwell, said.
"The AER first issued a compendium of electricity transmission guidelines in 2005, as part of fostering a more transparent environment in terms of AER regulatory processes and approach.
"It was always intended the guidelines would evolve over time as the AER develops its approach to implementing best practice regulation, to promote efficient investment through a stable and predictable regulatory regime. Revisions to the National Electricity Rules made by the Australian Energy Market Commission meant a revised set of guidelines were required to be developed in 2007, to ensure these objectives continue to be met," he said.
The guidelines relate to:
- the post-tax revenue model
- the roll forward model
- an efficiency benefit sharing scheme
- a service target performance incentive scheme
- submission guidelines, and
- cost allocation guidelines
The AER has also today made its final decision on information guidelines.
In making its final decisions the AER has taken into account submissions from interested parties.
A copy of each of the final decisions will be available from the AER's website.
Background
Summary of guidelines
Separate guidelines are set out that cover each of the following regulatory requirements on transmission network service providers when making applications to the AER in relation to their allowed revenues and prices:
Post-tax revenue model
This model takes as inputs the rolled forward asset base, forecasts of capital expenditure, operating expenditure and depreciation and calculates the revenue requirement that results for a business. This is a major regulatory tool used in a revenue determination. It also provides the baseline for the price-path for a regulatory control period which can be adjusted (or "smoothed") to avoid sudden price changes using a profile nominated by the regulated business.
Roll-forward model
Businesses are required to adjust their regulatory asset base at the end of the current regulatory control period to give an opening asset base for the next period for which a revenue determination is to be made. In addition, regulated businesses are required to use the model to forecast their closing asset base for each year in the next period. This data is an essential input into the post-tax revenue model.
Efficiency benefit sharing scheme
This scheme sets out an incentive mechanism whereby the business can earn additional revenue or be penalised depending on whether the business beats or exceeds targets for its operational expenditure in each year of the regulatory control period.
Service targets performance incentive scheme
This scheme relates to the actual services provided by the regulated business. It provides opportunities for additional income or penalties to apply depending on whether a business meets, or fails to meet, performance targets for the identified services.
Submission guidelines
Comprehensive and accurate data is required to process an application for a revenue determination. The submission guideline sets out through a series of templates and spreadsheets and accompanying explanatory materials a comprehensive listing of data needed to efficiently and effectively process an application for a revenue determination.
Cost allocation guidelines
Sets out the basis on which a business must allocate costs to the categories of activity within the business. Its primary purpose is to ensure that costs charged to regulated activities are properly related to those regulated activities. Note that this guideline does not cover the allocation of costs for pricing purposes which is to be subject of the pricing guideline under separate development.
Information guidelines
The information guidelines set out the manner and form in which, and date by which, electricity transmission network businesses should submit the following information to the AER:
- certified annual statements
- service performance information
- any additional information that the AER reasonably requires as set out under the National Electricity Rules.
The guidelines also detail the information that an electricity transmission network business must provide:
- when seeking the approval of the AER to pass through a positive pass through amount or a negative pass through amount
- a reduction in prices under clause 6A.26.2(b) of the National Electricity Rules and cost allocation among electricity transmission network businesses.