Outline Prices Profits Costs Focus on actuals comparison

  • Slides: 12
Download presentation
Outline • Prices • Profits • Costs - Focus on actuals; comparison to other

Outline • Prices • Profits • Costs - Focus on actuals; comparison to other NSPs; comparison to regulatory expectations - At this stage, mainly contextual and high level

NSW households currently paying 2 X VIC households and 2. 5 X GB households

NSW households currently paying 2 X VIC households and 2. 5 X GB households for elec. distribution network services 2

NSW DNSPs about twice as profitable as AER expected in current price controls And

NSW DNSPs about twice as profitable as AER expected in current price controls And don’t forget “debt guarantee” fees and income tax equivalents of $857 m in 2012/13 = 174% of actual dividends paid to Treasury By any measure an extraordinarily profitable industry. 3

Actual revenue running far ahead of expected, in spite of much lower throughput than

Actual revenue running far ahead of expected, in spite of much lower throughput than expected. Why? 4

NSW DNSP RAB per connection near the top end in Australia and about 3

NSW DNSP RAB per connection near the top end in Australia and about 3 X higher than VIC and about 7 X higher than GB! 5

And NSPs proposing only slightly less capitalised spend in coming RP than actual in

And NSPs proposing only slightly less capitalised spend in coming RP than actual in current RP 6

2012/13 opex/connection also near top end in Australia, though (relatively) not as bad as

2012/13 opex/connection also near top end in Australia, though (relatively) not as bad as RAB/connection 7

Proposed opex in next RP hardly changed from actual opex in this RP But

Proposed opex in next RP hardly changed from actual opex in this RP But headcount in next RP at least 1000 less than this RP. At $80 k person per year, headcount reduction should deliver savings of $400 m in next RP. So, where is the money going? 8

EBSS claims hard to understand How does $37 m overspend for Ausgrid translate into

EBSS claims hard to understand How does $37 m overspend for Ausgrid translate into $426 m bonus to be paid by consumers? 9

Proposed return on debt far, far above actual costs: More of the same. Mistakes

Proposed return on debt far, far above actual costs: More of the same. Mistakes of the past must not be repeated. 10

Energy density for Endeavour and Ausgrid in sharp decline NSW DNSPs project big bounce-back

Energy density for Endeavour and Ausgrid in sharp decline NSW DNSPs project big bounce-back in energy density. But why? Revenue cap provides strong incentives to over-forecast demand consumption. , Mistakes of the past must not be repeated. 11

Initial summary comments 1. NSW DNSPs currently have high costs, high prices and extraordinarily

Initial summary comments 1. NSW DNSPs currently have high costs, high prices and extraordinarily high profits. 2. Proposals do not head in the right direction: little change from current, if anything with declining energy density things actually getting worse. 3. The mistakes of the past in capex and opex allowances, return on debt and demand projections must not be repeated. 4. Looking forward to engaging with DNSPs and AER in constructive dialog. 12

Costs Variable costs costs of Fixed costs costsCosts Variable costs costs of Fixed costs costs
CLASSIFICATION OF COSTS PROFITS CONTRIBUTION Costs Quick QuizCLASSIFICATION OF COSTS PROFITS CONTRIBUTION Costs Quick Quiz
Profits l Entrepreneurs use profits to l PayProfits l Entrepreneurs use profits to l Pay
Production Profits Production and Profits Jennifer and JasonProduction Profits Production and Profits Jennifer and Jason
PRODUCT COSTS AND PRICES WHAT ARE PRODUCT COSTSPRODUCT COSTS AND PRICES WHAT ARE PRODUCT COSTS
The Nature of Costs Explicit Costs Accounting CostsThe Nature of Costs Explicit Costs Accounting Costs
Capital Costs Operating maintenance costs life Cycle costsCapital Costs Operating maintenance costs life Cycle costs
Indirect Costs 1 Indirect Costs Defined Indirect costsIndirect Costs 1 Indirect Costs Defined Indirect costs
BUDGETED COSTS Andr Rudder FEES vs COSTS CostsBUDGETED COSTS Andr Rudder FEES vs COSTS Costs
Types of Costs Fixed Costs Variable Costs 1Types of Costs Fixed Costs Variable Costs 1
PRODUCTION COSTS Definitions Short run costs costs thatPRODUCTION COSTS Definitions Short run costs costs that