Analysis of Key Drivers of Network Price Changes
16 April 2012
By Ann Whitfield, Brendan Quach, and Tom Graham
The primary focus of this report is to analyze the extent to which network price changes for both electricity transmission and distribution network service providers (NSPs) in the current regulatory period have been the result of changes in the revenue requirements for NSPs arising from changes in WACC and increases in forecast capex and opex allowances. NERA also identified the change in the NSPs' revenue requirement due to "other factors," outside of the increase in WACC, capex, and opex. In addition, NERA examined the key drivers behind the increases in WACC and forecast capex and opex allowances, and considered the extent to which they reflect changes in circumstances which have been recognized as legitimate by the AER, rather than indicating shortcomings with the current regulatory framework.
Specifically, this report is responding to the Australian Energy Market Commission's (AEMC's) call in its Directions Paper in relation to the AER's Rule change proposal for further evidence "on the drivers of increases in network costs and the relationship between the framework for capex and opex allowances and increases in network charges."
