Review of our approach to forecasting opex productivity growth for electricity distributors

Sector: 
Segment: 
Status: 
Date initiated: 
9 November 2018
Effective date: 
8 March 2019
Contact: 
AER General inquiries AERInquiry@aer.gov.au

Overview

On 8 March 2019, we published our final decision paper for this review and decided that a 0.5 per cent annual opex productivity growth rate reflects a reasonable forecast of the productivity growth a prudent and efficient electricity distributor can make. We intend to adopt this opex productivity growth forecast when we review the opex forecasts proposed by electricity distributors from now on.

Background

This review is part of our continuous improvement of our regulatory toolkit and will help to ensure that energy consumers pay no more than necessary for the safe and reliable distribution of electricity.

We have completed our review of our approach to forecasting operating expenditure (opex) productivity growth for electricity distributors.

Productivity growth is one element in the trend component of our opex forecasting approach. Our forecast of opex productivity growth is intended to capture the efficiency improvements an efficient and prudent distributor can make in providing distribution services. More details on how we use the forecast opex trend to assess distributors’ opex proposals are outlined in our Expenditure forecast assessment guideline.