The Australian Energy Regulator (AER) wishes to notify stakeholders of its time schedule for conducting its review of the weighted average cost of capital (WACC) parameters to apply to electricity transmission and distribution businesses. The review is a requirement of the National Electricity Rules (NER).
Scope of the review
The NER sets out the scope of the AER's review of the WACC parameters to apply to electricity distribution and transmission businesses. In respect of electricity distribution, the NER requires that the AER publish a statement of regulatory intent which will apply to the WACC parameters commencing from 31 March 2009. For transmission businesses the NER requires the AER to initiate a review of the WACC parameters by 1 July 2009. Whilst, the AER's decision on the WACC will apply to electricity network businesses in transmission and distribution, the AER expects its findings will also be of relevance to its consideration of gas access arrangements.
Timing of the review
The AER considers there is merit in aligning the distribution and transmission WACC reviews as previously noted by the Ministerial Council of Energy so that the review and consultation for both sectors is undertaken concurrently. Given the immediate requirement to have WACC parameters in place for distribution resets commencing in 2009, the AER considers that alignment is best achieved by bringing forward the completion date for the transmission WACC review to 31 March 2009. The AER has submitted a Rule change proposal to the AEMC seeking the alignment of both the transmission and distribution reviews and is proceeding on the basis that these reviews will be aligned subject to the outcome of the rule change process before the Australian Energy Market Commission. The bringing forward of the transmission WACC review will not have a practical consequence for any transmission network service provider (TNSP).
Consultation process
As part of the review, the AER will release an issues paper to focus stakeholder comment on issues that will assist the AER in its assessment of the WACC parameters. In particular, the issues paper will also outline the scope of the AER's review, key matters on which the AER seeks comment (including the provision of information and supporting evidence). Interested parties are not restricted to comment only on matters raised in the issues paper. Any information which interested parties consider relevant to the review will be considered by the AER.
Following the release of the draft decision, the AER will hold a pre-determination conference for interested stakeholders. Interested parties will have a further opportunity to provide submissions to the AER in response to the AER's draft decision.
The AER's public inquiry process for the transmission and distribution review is outlined below.
Summary of consultative process and key dates
Release of issues paper - July/August 2008
Due date for submissions on the issues paper - September 2008 (30 business days)
Release of draft decision (distribution and transmission) - Early December 2008 (maximum 80 business days prior to release of final decision)
Pre-determination conference - Date to be determined
Due date for submissions on draft decision (distribution and transmission) - January 2009 (minimum 30 business days)
Release of final decision (distribution and transmission) - 31 March 2008
Copies of the issues paper, submissions received from interested parties, the AER's draft decision and final decision will be made available on the AER's website.