Measuring NSP Inputs for Economic Benchmarking

AER Economic Benchmarking Workshop #6

7 May 2013

Denis Lawrence and John Kain

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GENERAL ISSUES

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Main Issue

Data requirements

• Are there any variables missing from tables 2 (for DNSPs) and 3 (for TNSPs) in section 3.2 that should be there?

• Are the definitions proposed appropriate for economic benchmarking?

• Should any of the definitions be altered to ensure consistency across DNSPs and across TNSPs, respectively?

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Other Issues

• Distribution cost coverage • Opex price index

• EGWW sector AWOTE or WPI – 62.0 per cent• Intermediate inputs – domestic PPI – 19.5 per cent• Data processing, web hosting and electronic information

storage PPI – 8.2 per cent• Other administrative services – 6.3 per cent• Legal and accounting PPI – 3.0 per cent, and• Market research and statistical services PPI – 1.0 per cent

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AWOTE vs WPI

0.8

1.0

1.2

1.4

1.6

1.8

2.0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

WPI

AWOTE

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Other Issues (cont’d)

• Easements • Distribution network complexity • System capacity and capital input quantities • WACC for use in economic benchmarking

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OPEX INPUTS

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Opex Specification #1

Quantity Value Price

Nominal opex / Weighted average price index

Opex (for network services group adjusted to remove accounting items not reflecting input use that year)

Weighted average of ABS EGWW AWOTE labour index and five ABS producer price indexes

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Opex Specification #2

Quantity Value Price

Nominal opex / Weighted average price index

Opex (for network services group adjusted to remove accounting items not reflecting input use that year)

Weighted average of ABS EGWW WPI labour index and five ABS producer price indexes

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CAPITAL INPUTS

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Capital Specification #1

Quantity Value Price

O/H MVA-kmsU/G MVA-kmsTransformers & other

KVA

Return of & on O/H capital

Return of & on U/G capital

Return of & on Trf & other capital

O/H AUC / MVA-kmsU/G AUC / MVA-kmsTrf & other AUC / KVA

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Capital Specification #2

Quantity Value Price

Nominal RAB Depreciation / ABS CGPI

Return of & on capital AUC / Const price RAB depreciation

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Capital Specification #3

Quantity Value Price

Nominal depreciated RAB / ABS CGPI

Revenue minus opex AUC / Const price depreciated RAB