Review of rate of return guideline

  • Accepting submissions
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

Our rate of return guideline (Guideline) 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.

AER releases its draft rate of return guidelines

On 10 July 2018 the AER released its draft rate of return guideline. Submissions on the draft will close on 14 September 2018.

AER establishes an independent panel to review the rate of return guideline

On 20 June 2018 the AER established an independent panel to review the rate of return guideline. More information on the panel including their CVs are on our rate of return guideline webpage under the draft decision.

Background

On 31 October 2017, we released an issues paper requesting views on whether our current approach to setting the allowed rate of return remains appropriate. This issues paper follows a consultation paper we published in July 2017, which sought views on how we could best run the Guideline review process, and a pre-issues paper public forum we held on 18 September 2017.

Discussion papers

On 28 February 2018 we released three discussion papers on the following matters to be discussed at the first concurrent evidence session:

  • Gearing
  • Financial performance measures
  • Risk and judgement

On 15 March 2018 we released three discussion papers on the following matters to be discussed at the second concurrent evidence session:

  • Gamma
  • Equity Beta
  • MRP, Risk Free Rate Averaging Period and Automatic Application

The discussion papers provide background on the matters to be discussed at the concurrent evidence sessions and questions to frame that discussion.

Evidence session - 1

On 15 March 2018 the AER held its first concurrent expert evidence session as part of its to review of the rate of return guidelines. This was a closed session to allow detailed and natural discussion between the AER Board and the participating experts. A transcript of the session is published on our website.

Evidence session - 2

On 5 April 2018 the AER held its second concurrent expert evidence session as part of its to review of the rate of return guidelines. Like the first evidence session, this was a closed session to allow detailed and natural discussion between the AER Board and the participating experts. A transcript of the session is published on our website.

Estimating the allowed return on debt data discussion paper

On 10 May 2018 we published a discussion paper addressing return on debt issues.

Register your interest

Interested stakeholders can register their interest and be kept informed of developments in this area by sending us an email at RateOfReturn@aer.gov.au.