Proposal
The Australian Energy Regulator (AER) is currently scheduled to provide its final 2020-25 network revenue determinations on 30 April 2020 for the following businesses:
We have completed our review of all the material we have received on these decisions and we are ready to make our final decisions. However, we are proposing to delay the above final revenue determinations to late May so we can use short-term forecasts of inflation from the Reserve Bank expected on 8 May 2020. Usually we would use the Reserve Bank forecasts from February in our final decisions. At the current time, we think it is desirable to wait for the May inflation forecasts, as, if available, they are likely to be a more accurate reflection of the economic circumstances going into the next regulatory control period.
Should our final revenue determinations be delayed to late May, we would work closely and quickly with the impacted network and retail businesses to enable new retail prices to be in places for 1 July 2020.
In the event the Reserve Bank does not publish new forecasts on 8 May 2020 we will publish our final decisions as soon as possible using the February short-term inflation forecasts to give certainty of prices over the five year regulatory period.
Invitation for submissions
Submissions on our proposal to delay the above final revenue determinations are welcome. However, time is short and so we ask for submissions by 27 April 2020. We are only seeking submissions on our proposal to delay the decisions and not other aspects of the upcoming decisions.
Submissions should be sent via email to: aerinquiry
aer [dot] gov [dot] au (AERInquiry[at]aer[dot]gov[dot]au)
Background
An estimate of inflation is an important input for determining efficient revenue allowances. We use short-term inflation forecasts published by the Reserve Bank in its quarterly Statement on Monetary Policy. Efficient revenue allowances help promote efficient operation of, use of and investment in monopoly energy network infrastructure. They thereby contribute to achieving the National Electricity and National Gas Objectives.
SA Power Networks, Energex and Ergon Energy are required to produce separate annual pricing proposals for the 2020-21 year following our final revenue determinations. To develop these prices, we propose to set the allowed revenue in the first year using the February forecast of inflation from the Reserve Bank. We will publish the allowed revenue for the first year at the end of April. If the May forecast leads to different revenue outcomes, we would make adjustments to the revenue allowances in the following years so that the correct revenue is allowed over the five year the regulatory control period for these businesses.