AER establishes an independent panel to review the rate of return guideline

The AER is currently reviewing its Rate of Return Guideline. The rate of return is a forecast of the cost of funds a network business requires to attract investment in its network. The rate of return makes up approximately 50 per cent of a network business’ allowed revenue. The network business’ revenue contributes up to 50 per cent of final electricity bills.

As a part of this process we will have an independent panel to review the draft guideline and report on whether it is supported by sound reasoning based on the available information such that it is capable of promoting achievement of the national gas and electricity objectives.

The main purposes of the independent panel process is to give the AER the benefit of an independent review, and to promote confidence amongst stakeholders that our findings on rate of return issues are robust and have been tested.

The Independent panel members are:

  • Natalia Southern – Chair of the Panel
  • Scott Hempling
  • Stewart Myers
  • Geoff Frankish
  • Pat Duignan

The panel members have diverse backgrounds and areas of expertise including regulatory, legal, economic, finance, consumer perspectives and institutional investment. More information on the panel including their CVs are on our rate of return guideline webpage under the draft decision.

The AER was provided with nominations from a range of stakeholders and performed a rigorous selection process in determining the final composition of the panel.

Background

The AER determines the amount of revenue that electricity and gas network businesses can recover from customers for the use of their networks. A key component of this allowed revenue is the ‘rate of return’. This is a forecast of the cost of funds a network business requires to attract investment in its network.

It enables network businesses to obtain necessary funds from capital markets to fund capital investments and service the debt they incur in borrowing the funds. The rate of return makes up approximately 50 per cent of a network business’ allowed revenue. The network business’ revenue contributes up to 50 per cent of final electricity bills.

Issued date: 
20 June 2018
AER reference: 
AC 78/18
Contact: 
General inquiries - Rate of return RateOfReturn@aer.gov.au