Rate of return and cashflows in a low interest rate environment - Pathway to Rate of Return 2022

Status: 
Category: 
Rate of return
Date completed: 
22 September 2021
Date initiated: 
21 May 2021
Effective date: 
22 September 2021
Contact: 
General enquiries - Rate of return RateOfReturn@aer.gov.au
AER reference: 
65402

Overview

This is the fifth 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 (NGO) and National Electricity Objective (NEO).

The draft working paper (published 21 May 2021) began our consideration on:

  1. Whether we are in a low interest rate environment;
  2. If we are, what are the consequences of lower interest rates; and finally,
  3. Does this suggest that there is something that needs to be addressed?

There was an online forum to discuss the draft working paper on Wednesday 23 June 2021. The submission period closed on Friday 2 July 2021. Presentations from the forum and all stakeholder submissions are available on the consultation page.

The final working paper (published 22 September 2021) considers and responds to stakeholder submissions, and sets out our preferred positions on whether the rate of return and the cash flows we set is appropriate in a low interest rate environment. It also sets out areas that warrant further consideration and consultation.