Ausgrid's cost allocation method (CAM) governs the manner in which Ausgrid is allowed to allocate costs to the services it provides. Allocation of costs between services is required to accurately represent costs incurred in providing the respective services. This prevents cross-subsidisation between distribution services and other services Ausgrid provides.
Our assessment of Ausgrid's CAM was assisted by advice from KPMG, which we engaged.
On 2 May 2014, the AER approved the revised CAM submitted by Ausgrid in accordance with chapter six of the National Electricity Rules. Its revised CAM replaces Ausgrid’s previous CAM approved by the AER in 2008. Ausgrid’s previous CAM was prepared and approved by the AER under transitional arrangements which expire at the end of the 2009-14 regulatory control period. Under those transitional arrangements, Ausgrid’s previous CAM reflected as much as practicable its CAM used to prepare its last regulatory proposal for the Independent Pricing and Regulatory Tribunal.
Ausgrid submitted its revised CAM for approval ahead of the upcoming regulatory control period, so its regulatory proposal for the new control period may be prepared accordingly. The CAM approved by the AER on 2 May 2014 is the first for Ausgrid prepared entirely in accordance with the National Electricity Rules’ cost allocation requirements.