the australian energy regulator sa electricity distribution determination 2015–2020...
TRANSCRIPT
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The Australian Energy Regulator
SA Electricity distribution determination 2015–2020
Consumer/stakeholder forum
3 September 2014
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TopicsWelcome & introductionsSession 1:
◦Introduction to regulatory frameworkSession 2:
◦Recap of last meeting – (March)◦Reset timeline◦CCP presentations/discussions◦Consumer issues and next steps
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Introduction to regulationEnergy market regulationRole of AERIncentive based regimeHow we assess regulatory proposals‘Building blocks’
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Energy market regulation
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The AER’s role in energyWholesale gas &
electricity markets
Transmission
networks & pipelines
Distribution
Networks for gas/electricity
Retail
& other distribution
We monitor wholesale markets and enforce rules
• Prices in the NEM are set by the market subject to the NER
• AER monitors market outcomes and behaviour
We regulate revenues of transmission
businesses
• Charges set by AER
• Transmission loss factors method set by AEMO
• Regulatory investments tests – AER assesses compliance
We regulate revenues of distribution
businesses
• Distribution prices and structures – AER approves annually subject to determination and NER
• Reliability standards – set by SA Govt
• Incentive schemes – defined in NER and set by AER at reset
• Rate of return – NER and AER guideline – set at reset for 5 years
We will regulate non-price retail activities
• National Energy Customer Framework - AER
• Retail price approach – SA Govt
• Adoption of NECF – SA Govt
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Incentive based regimeEx ante revenue determination based on
forecastsRevealed costs to pass savings to
consumersIncentives to draw out efficient behaviourWe don’t regulate the detailPricing comes after revenue has been set
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How we assess proposals (1)
We must make decisions that contribute to the achievement of the NEO (to the greatest degree).
NEO – promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to –◦ Price, quality, safety, reliability of supply of electricity; and◦ The reliability, safety and security of the national electricity system.
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How we assess proposals (2)Key aspects of NER:
◦Regulatory asset base – not re-valued◦Rate of return – benchmark efficient firm◦Capex objectives – efficient, meet demand,
obligations◦Opex objectives◦Depreciation ◦Tax allowance◦Incentive schemes
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How we assess proposals (3)
Control mechanism – revenue cap or price cap?Classification of services – what services will we
regulateOther distribution services (e.g. public lighting)Prices derived from the ‘building blocks’
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How we assess proposals (4)The building blocks:
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Return on capital (forecast RAB × cost of capital)
Regulatory depreciation (depreciation [net of indexation] applied RAB)
Corporate income tax (net of value of imputation credits)
Capital costs
Operating expenditure (opex)
Efficiency benefit sharing scheme (EBSS) (increment or decrement)
Total revenue
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How we assess proposals (5)Incentive schemes:
◦Service target performance incentive scheme (STPIS)
◦Efficiency benefit sharing scheme (EBSS)◦Capital expenditure sharing schemes (CESS)◦Demand management incentive scheme (DMIS)
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Other relevant pointsPricing
◦Arrangements for setting prices for 5 year period set at determination
◦Prices are set annually (with year 1 prices set in determination)
MeteringChanges to the NER
◦Pricing, demand management, role of DNSPs in metering
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Recap of last CCP meetingDate: 2 June 2014Key issues discussed:
◦SAPN’s consumer engagement◦vegetation management, reliability, impact of
solar, undergrounding lines◦effectiveness of incentive schemes◦the need for education on the regulatory
framework◦CCP presentations on key features of SAPN,
drivers of cost and comparison with other businesses
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Reset timeline
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30 April 2014F&A published
31 Oct 2014Businesses submit
regulatory proposals
10 Dec 2014Public forum –
Question the business on proposals. Also
release Issues paper
31 Jan 2015Submissions on
regulatory proposals close
30 April 2015AER publishes
preliminary determination
Predetermination conference
TBC but likely May 2015
2 July 2015 Submissions on
preliminary determination close
31 October 2015 AER publishes final
determination
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Future drivers of priceDownward pressure
◦Regulatory rules have been strengthened◦Cost of capital has fallen (10% => ?%)◦Consumption is much weaker
Upwards pressure◦Asset base additions – aged asset replacement
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Consumer Challenge Panel
Presentations
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SA consumer issuesDiscussion of SA consumer issues leading
into the 2015-20 reset
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SA reset - AER contacts
Moston Neck - 07 3835 4669
Robyn Lowien - 07 3835 4659
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