Rate of Return Guideline 2018

Category: 
Rate of return
Status: 
Date initiated: 
31 July 2017
Effective date: 
17 December 2018
Contact: 
General inquiries - Rate of return RateOfReturn@aer.gov.au
AER reference: 
58744

Overview

On 17 December 2018 the AER published its final decision on its Rate of Return review. The Final decision includes the Rate of Return Instrument and Explanatory Statement.  

This Rate of Return review process has been run in tandem with a proposal to amend the national electricity and gas legislation to replace the Rate of Return Guidelines with a binding legislative instrument.

Those legislative amendments have now been passed into law and were proclaimed on 13 December 2018. The amendments provide that the guidelines review process that has been undertaken by the AER will satisfy the consultation requirements for the first binding Rate of Return Instrument.

The Rate of Return Instrument sets out the approach by which we will estimate the rate of return, and comprises the return on debt and the return on equity, as well as the value of imputation credits.

On 4 April 2019 we corrected two typographical errors in the Rate of Return Instrument

Background

Our Rate of Return instrument sets out the approach by which we will estimate the rate of return, and comprises the return on debt and the return on equity, as well as the value of imputation credits.

Estimation of the rate of return is complex, and the rate of return is a significant driver of regulated revenue.