AER remitted NSW/ACT DNSPs 2014-19 opex decisions

PIAC responded to the AER’s issues paper regarding Ausgrid and Endeavour Energy’s remitted opex decisions for the 2014-19 regulatory control period. In PIAC’s view, the AER should use revealed costs to determine opex allowances for the DNSPs where they are not materially inefficient. Given that the revealed costs are higher than what was originally allowed, however, PIAC contends that the AER should compare revealed cost data with updated benchmarking models and bottom-up assessments to avoid inefficiently high opex.

If the revealed costs are shown to be inefficient, PIAC contends that there should be no transition period towards a more efficient spend. Also, the cost of any restructures should be funded out of profits as would be the case in a competitive market and consumers should not wear the costs.                       

Finally, the AER should not consider low capex and high opex to be related for Ausgrid and Endeavour Energy in the 2014-19 regulatory control period. In both cases, the businesses argue that their high opex in the early years of the 2014-19 period largely relates to the transition costs discussed above. Therefore, they are not efficiently replacing capital investment with higher opex.