Overview

Type
Sector
Electricity
Gas
Segment
Distribution
Transmission
Region
Queensland
New South Wales
Australian Capital Territory
Victoria
South Australia
Tasmania
Northern Territory
Status
Open
Date initiated
Effective date
Date completed
Categories
Rate of return
AER reference
65402

This is the third topic in a series of working papers that we will produce as part of our pathway to the 2022 Rate of Return Instrument. The outcomes from these working papers will feed in to the active phase of our 2022 rate of return instrument review. This information will assist us to set a rate of return that contributes to the achievement of the National Gas Objective and National Electricity Objective. 

The draft working paper (published 27 August 2020) evaluated a number of models that could be used to inform our estimate of the return on equity, which is one component of the overall rate of return. This included the Capital Asset Pricing Model (CAPM), which was the primary model used in the 2018 rate of return instrument. The working paper identified strengths and weaknesses of the candidate models.

There was an online forum to discuss the draft working paper on Wednesday 16 September 2020. The submission period closed on Friday 9 October 2020. Presentations from the forum and all stakeholder submissions are available on the consultation page.

The final working paper (published 16 December 2020) considers and responds to stakeholder submissions, and sets out our preferred options for estimating the return on equity. It also identifies areas of future work, including on input parameters for these equity models.