On 28 February 2007, SP AusNet submitted its revenue proposal and proposed negotiating framework and pricing methodology to the AER.
The AER conducted the preliminary examination of SP AusNet’s proposal required under clause 6A.11.1 of the NER. Additional information was sought from SP AusNet by 30 April 2007, to satisfy the requirements of the AER’s Submission Guidelines and the NER.
The AER held a public forum on 10 May 2007 on the regulatory proposal's submitted by SP AusNet and VenCorp.
The public forum provided SP AusNet with an opportunity to explain its proposal proposal and interested parties were able to ask questions.
In March 2007, NERA Economic Consulting released a preliminary report which identifies a potential bias in Treasury Indexed Bonds as a proxy for the real risk-free rate.
On the 31 May 2007 SP AusNet submitted to the AER a letter on remedying the use of biased raw yields on Commonwealth Government Securities (CGS) as a proxy for the risk free rate, attaching NERA’s preliminary report. SP AusNet indicated in that letter that a supplementary report from NERA would follow on the absolute bias in CGS.
SP AusNet submitted NERA’s second report to the AER on Thursday, 14 June 2007. After reviewing NERA's second report, SP AusNet considers there to be a compelling case that continued use of CGS yields to estimate the risk free rate without recognition of the relative and absolute bias would result in a significant underestimate of the allowed cost of capital. SP AusNet supports NERA's recommendation for correcting the bias when estimating the real risk free rate and submits that the AER adopt such an approach.
The AER received a late submission from the Energy Users Association of Australia, but was unable to address this submission in time for its draft decision.
The AER is required under Chapter 6A.9.4 of the National Electricity Rules (NER) to determine Negotiated Transmission Service Criteria (NTSC) to be specified in transmission determinations for SP AusNet and VENCorp.
The AER's transmission determination for SP AusNet must set out the NTSC that is to be applied by the Transmission Network Service Provider (TNSP) in negotiating the terms and conditions of access for negotiated transmission services and access charges. The NTSC will also be used by a commercial arbitrator in resolving any dispute between these TNSPs and a person wishing to receive a negotiated transmission service in relation to the terms and conditions of access for the service and access charges to be paid to or by the TNSP.
The NTSC determined by the AER must give effect to, and be consistent with, the negotiated transmission services principles set out in clause 6A.9.1 of the NER.