The Australian Energy
Regulator
SA electricity distribution
determination 2015–2020
Framework and approach
Presentation to the Energy Consumers’
Council
5 February 2014
TOPICS
 AER
preliminary position on F&A
 Next steps in the F&A process
 SAPN price review process
 Consumer engagement
 Key issues for consumers
2
SA F&A | Preliminary position

Preliminary position released on 20
December 2013.
◦ Service classification
◦ Control mechanism
◦ Incentive schemes
◦ Other matters
Written submission close on 19 February
2014
 Final F&A to be published in April 2014.

3
SA F&A | Service classification
4
SA F&A | Key changes

Some Type 6 metering services currently classified as
standard control.
◦ Energy data and storage services
◦ Metering investigation
◦ Unscheduled meter reading

AER’s preliminary position is to reclassify these services
as alternative control services.

Both SAPN’s standard and alternative control services are
currently under a WAPC form of control.

AER’s preliminary position is to move standard control
service to revenue cap, and alternative control service to
individual price cap.
5
SA F&A | Incentive schemes

AER’s preliminary position is to apply the
following schemes
◦ Efficiency benefit sharing scheme
◦ Service target performance incentive scheme
◦ Demand management incentive scheme
◦ Capital expenditure sharing scheme (New scheme)
6
SA F&A | Other matters

Forecasting methodology
◦ Application of the expenditure forecast assessment guideline
◦ SAPN forecasting methodology submitted on 29 November 2013

Depreciation
◦ Use forecast rather than actual depreciation to establish the RAB

Side constraint on small customer fixed
charges
◦ $10 constraint on annual change in fixed supply charge
◦ We seek stakeholder submissions on whether this should continue
or be amended
7
SA price review | Timeline
December 2013
30 April 2014
31 October 2014
January/February
2015
April 2015
June 2015
1 July 2015
31 October 2015
• Preliminary positions F&A (submissions close 19/2)
• F&A published
• SA Power Networks submits regulatory proposal
• Submissions on regulatory proposal close
• AER publishes draft decision
• Revised regulatory proposal submitted
• Submissions on revised regulatory proposal close
• AER publishes final determination
8
SA price review | Engagement

Consumer Challenge panel
◦ Provide an independent consumer perspective to challenge the
AER and network service providers during determination
processes.
◦ Total of 13 members, 6 members selected to form the sub-panel
for SA and Qld electricity distribution price determinations.

SA consumer workshop
◦ A consumer group will be established for the price review process

Public forums
◦ A number of forums will occur - for the regulatory proposal, AER
issues paper and draft decision.
9
SA price review | Key issues

2010–15 regulatory control period, SAPN’s revenue is
made up of:
◦ Return on capital (related to rate of return and capex) – 43.3%
◦ Opex – 29.3%
◦ Return of capital (related to depreciation) – 16.4 %
◦ Tax – 10.9%

Rate of return

Capex and opex driven by
◦ Growth
◦ Asset replacement
◦ Safety and reliability
10
SA F&A | AER Consumer Workshops
Meeting 1 - 20 November 2013
•Capture key issues to consider in our preliminary
positions paper
Meeting 2 - 22 January 2014)
•Discuss issues raised in our preliminary positions
paper, prior to the deadline for written submissions
Meeting 3 (week beginning 17 March 2014)
•Discuss how we are considering submissions received
and the likely direction of the final F&A
11
QUESTIONS?
Email: [email protected]
12