Jemena Gas Networks (NSW) - Access arrangement 2015-20 - Remittal

Sector: 
Segment: 
Commencement date: 
25 August 2017
Regulatory period: 
25 August 2017 (5 years)
Status: 
Contact: 
General enquiries – NSW/ACT Remittals NSWACTremittal@aer.gov.au
AER reference: 
62669

Overview

The AER is required to remake its decision on the access arrangement that applies to Jemena Gas Networks (JGN) for the period 1 July 2015 to 30 June 2020.

On 21 December 2017, the AER put out its position paper and invited submissions from interested parties on issues related to the remaking of our debt decision for electricity distributors – Ausgrid, Endeavour Energy, Essential Energy and Actew AGL - for the period 1 July 2014 to 30 June 2019 and Jemena Gas Networks for the 2015-20 access arrangement period. Submissions on the position paper closed on 24 February 2018, and are available under the initiation milestone.

Background

In April and June 2015 the AER published final decisions on distribution determinations for NSW and ACT electricity distributors (Ausgrid, Endeavour Energy, Essential Energy and ActewAGL Distribution) for 2019-24, and on the access arrangement for the NSW gas distributor, Jemena Gas Networks for 2015-20.

All five businesses sought merits review of the AER’s final decisions. The Public Interest Advocacy Centre (PIAC) also applied for review of the AER’s NSW final decisions. The Commonwealth minister intervened.

The Tribunal handed down its decisions in February 2016 (and March 2016 for JGN). It remitted the decisions back to the AER to be remade, in particular in accordance with its orders regarding the return on debt; the value of imputation credits (gamma), which is relevant to the businesses’ tax allowance; the four electricity distributors’ operating expenditure (and for ActewAGL the implications of this for the Service Target Performance Incentive Scheme); and aspects of JGN’s capital expenditure.

In March 2016 the AER sought judicial review of the Tribunal’s decisions on gamma, return on debt and opex in the Full Federal Court.

The Court upheld the AER's appeal in respect of the Tribunal's construction of the rules regarding gamma, which feeds into the businesses tax allowance. The Court dismissed the AER's appeal in relation to the cost of debt and the operating expenditures of the electricity businesses.

The AER must now revisit its decisions on return on debt; the four electricity distributors’ operating expenditure (and for ActewAGL the implications of this for the Service Target Performance Incentive Scheme); and aspects of JGN’s capital expenditure.

There will not be an issues paper on capital expenditure. Instead, the AER hosted a roundtable meeting with JGN and the AER's Consumer Challenge Panel - subpanel 10 (CCP) on 18 January 2018. The purpose of the meeting was to discuss and work toward a potential resolution on the AER's 2015-20 set aside determination on market expansion capital expenditure (ME capex). Issues discussed at the meeting included the AER's proposed approach to remaking the ME capex decision, JGN's response to the AER's proposed approach, JGN's ME capex to date for the currently regulatory period, and the CCP's view on the remittal process and expectations from the consumer perspective. The slides from the meeting are presented below. At the meeting, JGN noted that it had reviewed the AER's model and agreed that it implements the AER's preferred approach. JGN committed to working constructively with the AER as it finalises its review of ME capex. Parties did not raise any outstanding issues about the AER's proposed ME capex allowance. The AER will aim to release its draft decision for stakeholder consultation in the first half of 2018.