On 31 July 2017 the AER released its consultation paper on the process for reviewing the rate of return guideline.

This consultation paper is the first step towards reviewing the current rate of return guideline. It is our preliminary consultation with stakeholders on the process for review of the guidelines, rather than the substantive rate of return issues.

We are exploring options for making our rate of return guideline review process more accessible, transparent and collaborative. We consider this will promote confidence in our guideline.

As such, we have identified a number of mechanisms we propose to include in the process and our preliminary views on how they might work.

We invited interested parties to make submissions on our consultation paper on the process for reviewing the rate of return guidelines. Submissions closed on 28 August 2017.

On 18 September 2017, we held a public forum on our upcoming issues paper and the key issues to be investigated during our review of the rate of return guideline. The forum gave stakeholders the opportunity to discuss rate of return issues and allowed us to engage with stakeholders to consider their main concerns.

If you are interested in finding out more information about the forum, please refer to the public forum material.

Note: The Australian Energy Council was unable to make its presentation on the day, but has made its slides available for stakeholders.

On 28 November 2017, we released our positions paper on the process for reviewing the rate of return guideline (Guideline). In particular, it describes how we will implement:

• The independent panel review of our draft guideline
• The concurrent expert evidence sessions
• The consumer reference group.

This builds on our consultation paper, released on 31 July 2017, and submissions from stakeholders received in response to that consultation paper.

On 31 October 2017, we released our issues paper requesting views on the extent to which our current approach to setting the allowed rate of return remains appropriate. This follows a consultation paper we published in July 2017, which sought views on how we could best run the rate of return guideline review process, and a pre-issues paper public forum we held on 18 September 2017.

Submissions to the Rate of Return Guideline issues paper closed on 12 December 2017.

The AER’s Rate of Return team have extended previous published empirical equity beta studies and developed this paper which contains updated analysis and data.

This analysis is relevant to the current rate of return guideline review.

The AER’s Rate of Return team has developed this paper which contains analysis and data for various industries.

This analysis is relevant to the current rate of return guideline review.

On 15 March 2018 the AER held its first concurrent expert evidence session as part of its review of the rate of return guidelines. This was a closed session to allow detailed and natural discussion between the AER Board and the participating experts.

Disclaimer: In the interests of transparency and to assist stakeholders in having prompt access to a transcript of the first concurrent evidence session, the AER has published an un-proofed version of the transcript of evidence session 1 held on 15 March 2018. This version should not be relied upon.

The final proofed version of the transcript is now available.

The purpose of the concurrent expert evidence sessions is to assist the AER Board in making a decision which will best achieve the national gas and electricity objectives by allowing them to clearly define the issues of agreement and areas of disagreement between relevant experts.

On 28 February 2018 we released three discussion papers on the following matters to be discussed at the first concurrent evidence session:

• Gearing
• Financial performance measures
• Risk and judgement

The discussion papers provide background on the matters to be discussed at the concurrent evidence sessions and questions to frame that discussion.

We have also published a report by Darryl Biggar, referenced in the Financial performance measures discussion paper. This paper outlines his views on the information value of RAB multiples.

On 5 April 2018 the AER held its second concurrent expert evidence session as part of its review of the rate of return guideline. This was a closed session to allow detailed and natural discussion between the AER Board and the participating experts.

Disclaimer: In the interests of transparency and to assist stakeholders in having prompt access to a transcript of the second concurrent evidence session, the AER has published an un-proofed version of the transcript of evidence session 2 held on 5 April 2018. This version should not be relied upon. Once all experts have reviewed the transcript the AER will publish a final version on our website.

The final proofed version of the transcript is now available.

The purpose of the concurrent expert evidence sessions is to assist the AER Board in making a decision which will best achieve the national gas and electricity objectives by allowing them to clearly define the issues of agreement and areas of disagreement between relevant experts.

On the 15 of March 2018 we released three discussion papers on the following matters to be discussed at the second concurrent evidence session:

• Gamma
• Equity Beta
• MRP, Risk Free Rate Averaging Period and Automatic Application

The discussion papers provide background on the matters to be discussed at the concurrent evidence sessions and questions to frame that discussion.

The expert joint report of the Rate of Return Guideline Review's Concurrent Evidence Sessions 1 & 2.

Relevant material and information either at the request of the AER’s rate of return team or submitted to it through other regulatory processes.

Following the 5 April 2018 concurrent evidence session, AER staff asked the ATO to provide it with a publishable document in response to the AER questions set out in Note on the ATO staff response to AER staff inquiries about Hathaway’s 2013 report on imputation credit redemption dated 29/03/2018. AER staff indicated to ATO staff that there was material discussion of the AER note at the concurrent evidence session. It provided the ATO with web links to the draft transcript and the AER note. In response to the AER’s request the ATO provided the 9 May 2018 ATO note for publication.

Following the provision of the ATO note dated 9 May 2018, on 5 July 2018 staff and consultants of the AER and of Energy Networks Australia met with staff of the ATO to discuss the limitations of the use of the various ATO data for the AER's regulatory purposes.

On the 14 September 2018 the ATO provided clarification to the AER in relation to points in the prior ATO note to the AER dated 9 May 2018.

Submissions on our evidence sessions, discussion papers and transcripts closed 4 May 2018.

On 10 May 2018 we published a discussion paper addressing return on debt issues. With the paper, we have also published a new report from Chairmont Group presenting aggregated actual return on debt information. We sought and were provided this information by privately-owned networks that we regulate. We are mindful that this discussion paper is being released later in the review process than our previous discussion papers. This was a consequence of the time taken to receive the responses and for us to aggregate and undertake preliminary analysis on the complex underlying information. Now that we have advanced our analysis, we are of the view that stakeholders should have an opportunity to consider and comment on this information prior to the draft guideline.

The role of the aggregated information is to assist stakeholders to consult on debt raising practices across the sector without disclosing commercially sensitive details of the individual debt instruments provided to the AER.

We are also engaging with stakeholders on the possibility of a forum or concurrent expert evidence session to consult further on the issues raised in the discussion paper. We will keep stakeholders informed of developments on further consultation via the rate of return mailing list.

Submissions on our debt discussion paper closed 30 May 2018.