A distributor’s capex allowance contributes to the return of capital and return on capital building blocks that form part of its total revenue requirement. Under the regulatory framework, a distributor must include a total forecast capex that it considers is required to meet or manage expected demand, comply with all applicable regulations, and to maintain the safety, reliability, quality and security of its network (the capex objectives).
We must decide whether or not we are satisfied that this forecast reasonably reflects prudent and efficient costs and a realistic expectation of future demand and cost inputs (the capex criteria). We must make our decision in a manner that will, or is likely to, deliver efficient outcomes that benefit consumers in the long term (the National Electricity Objective).
The capex assessment outline for electricity distribution determinations explains the obligations of the AER and distributors under the NEL and NER, and the techniques we use to assess a distributor’s capex proposal against the capex criteria and objectives. This document forms part of the supporting information for our regulatory decisions on electricity distributors’ capital expenditure from 31 January 2020.
We have previously included this information in our capital expenditure draft and final decision attachments. This document does not indicate a change to our assessment approach.