Information paper
Back to topOn 17 December 2021 we released our Rate of Return information paper, the start of the Making the Instrument papers and activities. The information paper sets out the priority topics that will be the focus of the experts' Concurrent Evidence Sessions in February and calls for submissions.
| Documents (1) | Author |
|---|---|
| AER - Rate of return - Information paper and call for submissions - December 2021 ( PDF 609.52 KB ) | AER |
Update
Back to topDuring the 2018 Rate of Return Instrument process, we received a note from the Australian Taxation Office (ATO) containing two estimates related to the gamma parameter. We placed limited weight on this information from the ATO for several reasons.
We have received an update of the 2018 note from the ATO and, as noted in the Overall Rate of Return working paper and the Information Paper, we are currently investigating the possible use of the ATO note to inform gamma.
| Documents (2) | Author |
|---|---|
| ATO Note - Franking account reconciliation - 28 October 2021 ( PDF 307.63 KB ) | Australian Taxation Office (ATO) |
| ATO Note - Franking account reconciliation - 11 December 2018 ( PDF 721.73 KB ) | Australian Taxation Office (ATO) |
Supporting information
Back to topWe have published below our correspondence with the RBA in relation to our work on the market risk premium (MRP).
HoustonKemp provided a review of the RBA's research discussion paper 2019-04, A History of Australian Equities, for Energy Networks Australia (ENA). This paper as well as HoustonKemp's correspondence is published below.
| Documents (5) | Author |
|---|---|
| AER letter to RBA on MRP - 14 September 2021 ( PDF 332.3 KB ) | AER |
| RBA letter to AER - 1 October 2021 ( PDF 119.9 KB ) | Reserve Bank of Australia (RBA) |
| ENA - HoustonKemp review of RBA Discussion paper on market risk premium - August 2021 ( PDF 505.17 KB ) | HoustonKemp |
| HoustonKemp - Internal memo re research discussion paper 2019-04 - 10 March 2022 ( PDF 270.5 KB ) | HoustonKemp |
| HoustonKemp - Letter to RBA re research discussion paper 2019-04 - 11 March 2022 ( PDF 172.01 KB ) | HoustonKemp |
Submissions
Back to topWe invited interested stakeholders to make submissions on both our final omnibus paper and this information paper. Submissions closed on 11 March 2022.
Late submissions
Back to topOn 11 April 2022, we received the following memo from ENA summarising their views on reaching a cost of equity estimate in the 2022 Rate of Return Instrument applying regulatory discretion.
| Documents (1) | Author |
|---|---|
| ENA Memorandum - Follow-up to AER Board Discussions on RORI - 30 March 2022 ( PDF 589.6 KB ) | Energy Networks Australia (ENA) |
Evidence session
Back to topAs part of our stakeholder engagement on the 2022 Rate of Return Instrument we held evidence sessions to hear expert opinions about the proposed instrument. We called for nominations of eligible experts and also considered whether there are other expert opinions that can inform our decision. The Evidence Sessions were held in four 2.5 hour sessions across two separate days, 10 and 17 February 2022.
| Session number | Session date | Session time (AEDT) | Topics to be covered | Experts |
|---|---|---|---|---|
| 1 | 10 February 2022 | 9:30 am to 12 noon |
Energy Infrastructure Credit Equity beta |
|
| 2 | 10 February 2022 | 1:30 to 4 pm |
Term of rate of return Weighted trailing average |
|
| 3 | 17 February 2022 | 9:30 am to 12:30 pm | Market Risk Premium |
|
| 4 | 17 February 2022 | 2:00 to 4:30 pm |
Cross-checks Overall rate of return |
|
A detailed agenda for each session is available below. The sessions were closed to allow detailed and natural discussion between the AER Board and the participating experts.
A meeting note from the experts conclave held on 27 January 2022 is available below as well as additional questions received from stakeholders for consideration.
Update
Back to topWe commissioned this work following stakeholder submissions on the Overall rate of return draft working paper that Regulated Asset Base (RAB) multiples should be used as a cross check. Cambridge Economic Policy Associates (CEPA) were engaged to analyse RAB trading multiples and their report is now published below. We will accept submissions on the CEPA report along with submissions on the draft rate of return Instrument.
| Documents (3) | Author |
|---|---|
| CEPA - EV RAB Multiples Report ( PDF 760.78 KB ) | Cambridge Economics Policy Associates Ltd |
| CEPA - EV RAB Historical Model ( XLSX 2 MB ) | Cambridge Economics Policy Associates Ltd |
| CEPA - Inference Model ( XLSX 2.05 MB ) | Cambridge Economics Policy Associates Ltd |
Submissions
Back to topIn response to the publication of the CEPA report, ENA and AusNet Services have provided the following submissions.
| Documents (3) | Author |
|---|---|
| AusNet Services - CEPA Regulatory Asset Base (RAB) Multiples - Report for the AER - 31 May 2022 ( PDF 210.66 KB ) | AusNet Services |
| ENA - 2022 Rate of Return Instrument Review - CEPA Report EV/RAB Multiples - 27 May 2022 ( PDF 627.41 KB ) | Energy Networks Australia (ENA) |
| Frontier Economics - Analysis of RAB multiples - 27 May 2022 ( PDF 342.42 KB ) | Frontier Economics |