Overview

Information paper

On 17 December 2021 we released our Rate of Return information paper, the start of the Making the Instrument papers and activities. The information paper sets out the priority topics that will be the focus of the experts' Concurrent Evidence Sessions in February and calls for submissions.

Update

During the 2018 Rate of Return Instrument process, we received a note from the Australian Taxation Office (ATO) containing two estimates related to the gamma parameter. We placed limited weight on this information from the ATO for several reasons.

We have received an update of the 2018 note from the ATO and, as noted in the Overall Rate of Return working paper and the Information Paper, we are currently investigating the possible use of the ATO note to inform gamma.

ATO Note - Franking account reconciliation - 28 October 2021

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Authors
Australian Taxation Office (ATO)

ATO Note - Franking account reconciliation - 11 December 2018

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Authors
Australian Taxation Office (ATO)

Supporting information

We have published below our correspondence with the RBA in relation to our work on the market risk premium (MRP).

HoustonKemp provided a review of the RBA's research discussion paper 2019-04, A History of Australian Equities, for Energy Networks Australia (ENA). This paper as well as HoustonKemp's correspondence is published below.

Submissions

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We invited interested stakeholders to make submissions on both our final omnibus paper and this information paper. Submissions closed on 11 March 2022.

AGIG SAPN VPN - 2022 Rate of Return Instrument review - Omnibus papers final - Submission - 11 March 2022

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Authors
Australian Gas Infrastructure Group (AGIG)
SA Power Networks
Powercor and United Energy
CitiPower

APGA - 2022 Rate of Return Instrument information paper - Submission - 11 March 2022

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Authors
Australian Pipelines and Gas Association (APGA)

GIIA - AER final omnibus paper - Submission - 11 March 2022

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Authors
Global Infrastructure Investor Association (GIIA)

QTC - Submission - AER Rate of Return information paper and final working papers

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Authors
Queensland Treasury Corporation (QTC)

QTC - Submission attachment - PTRM-weighted trailing average cost of debt example

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Authors
Queensland Treasury Corporation (QTC)

Late submissions

On 11 April 2022, we received the following memo from ENA summarising their views on reaching a cost of equity estimate in the 2022 Rate of Return Instrument applying regulatory discretion.

ENA Memorandum - Follow-up to AER Board Discussions on RORI - 30 March 2022

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Energy Networks Australia (ENA)

Evidence session

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As part of our stakeholder engagement on the 2022 Rate of Return Instrument we held evidence sessions to hear expert opinions about the proposed instrument. We called for nominations of eligible experts and also considered whether there are other expert opinions that can inform our decision. The Evidence Sessions were held in four 2.5 hour sessions across two separate days, 10 and 17 February 2022.

The topics covered and the related experts 
Session number Session date Session time (AEDT) Topics to be covered Experts
1 10 February 2022 9:30 am to 12 noon

Energy Infrastructure Credit
Spread Index (EICSI)

Equity beta

  • Glenn Boyle
  • Jim Hancock
  • Tom Hird
  • Dinesh Kumareswaran
  • Martin Lally
2 10 February 2022 1:30 to 4 pm

Term of rate of return

Weighted trailing average

  • Glenn Boyle
  • Jim Hancock
  • Tom Hird
  • Dinesh Kumareswaran
  • Martin Lally
  • Graham Partington
3 17 February 2022 9:30 am to 12:30 pm Market Risk Premium
  • Glenn Boyle
  • Toby Brown
  • Dinesh Kumareswaran
  • Martin Lally
  • Jonathan Mirrlees-Black
  • Graham Partington
4 17 February 2022 2:00 to 4:30 pm

Cross-checks

Overall rate of return

  • Glenn Boyle
  • Toby Brown
  • Jim Hancock
  • Dinesh Kumareswaran
  • Jonathan Mirrlees-Black
  • Graham Partington

A detailed agenda for each session is available below. The sessions were closed to allow detailed and natural discussion between the AER Board and the participating experts.

A meeting note from the experts conclave held on 27 January 2022 is available below as well as additional questions received from stakeholders for consideration.

Martin Lally - Session 3 - MRP notes - February 2022

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Dr Martin Lally

ENA - Suggested questions for evidence sessions - January 2022

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Authors
Energy Networks Australia (ENA)

CRG - Suggested questions for evidence sessions - January 2022

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Authors
Consumer Reference Group (CRG)

Update

We commissioned this work following stakeholder submissions on the Overall rate of return draft working paper that Regulated Asset Base (RAB) multiples should be used as a cross check. Cambridge Economic Policy Associates (CEPA) were engaged to analyse RAB trading multiples and their report is now published below. We will accept submissions on the CEPA report along with submissions on the draft rate of return Instrument.

CEPA - EV RAB Multiples Report

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Cambridge Economics Policy Associates Ltd

CEPA - EV RAB Historical Model

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Authors
Cambridge Economics Policy Associates Ltd

CEPA - Inference Model

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Authors
Cambridge Economics Policy Associates Ltd

Submissions

In response to the publication of the CEPA report, ENA and AusNet Services have provided the following submissions.