Ergon Energy's cost allocation method (CAM) governs the manner in which Ergon Energy is allowed to allocate costs to the services it provides. Allocation of costs between services is required to accurately represent costs incurred in providing the respective services. This prevents cross-subsidisation between distribution services and other services Ergon Energy provides.
On 15 August 2014, the AER approved CAM submitted by Ergon Energy in accordance with chapter six of the National Electricity Rules. Ergon Energy's CAM replaces its previous CAM approved by the AER. Ergon Energy's previous CAM was prepared and approved by the AER under transitional arrangements which expire at the end of the 2010-15 regulatory control period.
Ergon Energy submitted an earlier draft iteration of its proposed CAM on 6 May 2014. We assessed that draft proposed CAM. Resulting from this assessment, Ergon Energy was provided with feedback that some changes were required to permit the CAM's approval. Feedback was provided in written form, enhanced by discussions between AER staff and Ergon Energy staff.
As a consequence of this process, Ergon Energy submitted a revised proposed CAM on 29 July 2014. This has again been assessed by AER staff. The results of our assessment of Ergon Energy's revised proposed CAM against the requirements of our guidelines are set out in section 3 of our decision paper.