Review of expected inflation 2017

Status: 
Category: 
Post tax revenue model
Date initiated: 
18 April 2017
Effective date: 
31 December 2017
Contact: 
General inquiries - Rate of return RateOfReturn@aer.gov.au
AER reference: 
58744

Overview

Recently, the method for estimating expected inflation has been the subject of debate in our regulatory determinations. Expected inflation is an important parameter for modelling future revenues in both electricity and gas regulatory determinations and is applied uniformly across both sectors.

Our method for estimating expected inflation is set out in the Post-Tax Revenue Model. The National Electricity Rules require us to use the method that is set out in the current version of the model. To fully consider inflation-related issues that have been raised with us, we have instituted an industry-wide consultation and review.

The next step in the review is a technical workshop on the treatment of inflation in our regulatory models. We have chosen to undertake this additional consultation step in response to submissions received on our discussion paper. This results in the following amended timetable for the completion of the review:

Step Date
Technical workshop on regulatory models 9 August 2017
Publish explanatory statement
(initiate amendments to PTRM/RFM, if required)
September 2017
Stakeholder and consumer engagement workshops on explanatory statement October 2017
Submissions close on explanatory statement November 2017
Publish final decision
(including final amended PTRM/RFM, if required)
December 2017