On 11 July 2019, the Australian Energy Regulator (AER) published a discussion paper on the advice it sought from PricewaterhouseCoopers (PwC) on approaches to allocate interest and tax expenses from corporate groups to network service providers (NSPs) for determining the return on equity (regulatory) profitability measure.
PwC's advice was sought as part of our review into measures of profitability that can be applied to the electricity and gas network businesses that we regulate. In April 2018, we published a draft position paper which set out the six profitability measures we intend to report on. To assist in our review, we formed a working group of consumer and industry representatives to meet regularly and work through issues raised in response to the draft position paper. The next stage in the review was delayed, but we are now able to recommence the review and intend to publish the final position paper on the profitability measures in December 2019.
One issue to be considered is the proposed return on equity (regulatory) profitability measure and how allocations of interest and tax expenses to the NSPs from their corporate groups could be done for the purpose of determining this measure. PwC's advice will be used to inform our views on how these allocations could be made for our review into the types of profitability measures that could be applied to the NSPs we regulate. To further inform this discussion, we are seeking stakeholders' views on PwC's advice and the associated data that would be required to make these allocations. In forming a final position on the return on equity (regulatory) measure for our review, we will have regard to submissions from stakeholders and discuss our views on PwC's advice with the stakeholder working group.
Invitation for submissions
Interested parties are invited to make submissions by close of business 22 August 2019. Submissions should be emailed to firstname.lastname@example.org.