On 21 May 2021 the AER published a working paper on Term of the rate of return. The working paper seeks to:

• Identify a suitable term for setting an efficient rate of return that contributes to achieving the NGO and NEO.
• Examine if the terms for the return on equity, return on debt and expected inflation should align.
• Ascertain the effect of a trailing average return on debt on the choice of term.

To help us understand finance theory and practice, we commissioned expert advice from Dr Martin Lally.

On Tuesday 15 June 2021 we hosted an online forum for stakeholders to ask questions of the AER and interact directly to hear each other's perspective.

The AER would like to thank those who presented at the forum, as well as those who were able to attend on the day to listen to the views of other stakeholders.

We invited interested parties to make submissions on our draft working paper on the Term of the rate of return. Submissions closed on 2 July 2021. This submission period coincided with our submission period for our draft working paper on the Rate of return and cashflows in a low interest rate environment. Many parties responded to both working papers with a single submission.

We received one submission after the closing date.