A missed opportunity?

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A missed opportunity?
Submission to the Australian Energy Regulator’s Draft price determination for Ausgrid, Endeavour Energy and Essential Energy
Bev Hughson, Darach Energy Consulting.
Publication Date:
13 Feb 2015
Publication Type:

This submission responded to the Australian Energy Regulator’s (AER) draft revenue determination (the draft determination) for the three NSW electricity distribution network service providers (DNSPs) – Ausgrid, Endeavour Energy and Essential Energy. The submission also responded to the revised revenue proposals from the DNSPs to the AER, made in response to the AER’s draft determination. In this submission, PIAC argued strongly that the AER should not increase the amount of revenue to the DNSPs from the level outlined in the draft determination. PIAC supported the significant cuts to capital and operating expenditure contained in the draft determination (relative to the DNSPs’ initial proposals). PIAC stated its belief that such cuts would not create extra risks in terms or the safety or reliability of the network, as had been argued by DNSPs in their revised proposals. In addition, this submission argued that the AER should make further cuts to the weighted average cost of capital (WACC). PIAC stated a belief that the draft determination was developed using a methodology that built a series of conservative assumptions upon one another, resulting in an overly generous WACC allowance and, therefore, higher prices for consumers than necessary. This submission also argued that while there has been some progress, the DNSPs must continue to improve their consumer engagement efforts. Finally, this submission argued that the AER should reverse its decision in the draft determination not to grant DNSPs their requested allowance to carry out demand management (DM) activities.

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