Regulatory Determination support for an Australian distribution network

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Client Networks NSW
Dates 2015
Sector(s)Energy
Service(s)Policy & Economics, Regulation & Competition, Review & Evaluation

A team of CEPA consultants supported David Newbery, CEPA Vice-Chairman, in the preparation of an expert report for Networks NSWs (three Australian distribution companies) revised regulatory submissions to the AER, the Australian regulator.

David was engaged by Ashurst on behalf of Network NSWs to provide general observations on:

·         The economic basis and purpose for the regulation of monopoly electricity distributors.

·         What do you understand the NEO to mean?

·         What would be the key design features of an economic regulatory regime that is designed to achieve the NEO?

·         Is a correct application of the building block framework to determining the annual revenue requirement for direct control services likely or not to contribute to the achievement of the NEO? If so, how? If not, why not?

·         To the extent you consider in response to (d) that the correct application of the building block framework is likely to contribute to the achievement of the NEO, if there is a material error in the application of the framework what are the likely consequences for the achievement of the NEO or the purpose of the economic regulation of monopoly electricity distributors referred to above?

·         How, if at all, the appropriate regulation of monopoly electricity distributors takes into account the actual position of the regulated entity.

·         On the AER’s approach to benchmarking.

·         To the extent costs are forecast to be incurred in a regulatory control period (such as redundancy payments) which are associated with the restructuring of a business undertaken to reduce costs in the long-run, what considerations are relevant to the regulatory treatment of such costs, including in the context of a regime that has as its objective one such as the NEO?

David’s expert report was published alongside the Network NSWs’ revised submission to the AER.
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