The Australian Energy Regulator SA Electricity distribution determination 2015–2020...
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Transcript of The Australian Energy Regulator SA Electricity distribution determination 2015–2020...
The Australian Energy Regulator
SA Electricity distribution determination 2015–2020
Consumer/stakeholder forum
3 September 2014
TopicsWelcome & introductionsSession 1:
◦Introduction to regulatory frameworkSession 2:
◦Recap of last meeting – (March)◦Reset timeline◦CCP presentations/discussions◦Consumer issues and next steps
2
Introduction to regulationEnergy market regulationRole of AERIncentive based regimeHow we assess regulatory proposals‘Building blocks’
3
Energy market regulation
4
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
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
6
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.
7
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
8
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’
9
How we assess proposals (4)The building blocks:
10
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
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)
11
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
12
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
13
Reset timeline
14
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
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
15
Consumer Challenge Panel
Presentations
16
SA consumer issuesDiscussion of SA consumer issues leading
into the 2015-20 reset
17
SA reset - AER contacts
Moston Neck - 07 3835 4669
Robyn Lowien - 07 3835 4659
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