AER review of the Rate of Return Guideline

PIAC lodged a submission to the AER on its review of the rate of return guideline, in addition to comments given verbally as part of the AER’s Customer Reference Group for the review. The guideline sets the method the AER will follow in determining the rate of return for regulated businesses. PIAC supports an incremental review of specific aspects of the existing rate of return guideline, and generally agreed with priority areas identified in the AER’s Issues Paper. 

PIAC supports the AER having regard to additional information such as profitability, asset sales and financeability, as well as new prospective data sets. The AER should retain discretion as to whether and how to incorporate this data in its decisions. PIAC stressed that more data should never be used as a proxy for better data and recommends the AER include principles for considering new data sources.

PIAC recommends the AER examine the risks that efficient regulated network businesses face, supplemented by a bottom-up analysis of the risk allocation between networks and consumers.

PIAC supports the AER’s approach to estimating gamma and considers that, following the recent decisions of the Australian Competition Tribunal and Full Federal Court, re-prosecuting arguments around the estimation method is unnecessary.