Return on debt illustrative model review

Status: 
Effective date: 
10 December 2019
Contact: 
General inquiries - Rate of return RateOfReturn@aer.gov.au
AER reference: 
65404

Overview

The AER has developed a return on debt illustrative model (in excel spreadsheet form) that calculates the regulated return on debt in accordance with the 2018 rate of return instrument.

The illustrative model is intended to be used as a tool to help users understand and calculate the return on debt for a network business. Stakeholders can use the model to replicate the AER’s regulated return on debt calculations and test outcomes under different input scenarios.

The illustrative model does not replace the 2018 rate of return instrument (Rate of Return Guideline) and if there are any differences between the model and the instrument, the instrument should be deemed as the correct version. In particular, the model does not cover all the possible scenarios laid out in the instrument. The likelihood of some of these scenarios occurring is low, and attempting to cover all these contingencies would greatly increase the complexity—and greatly decrease the accessibility—of the model. The ordering of clauses and contingencies not factored into this model is laid out in the handbook.