The Australian Energy Regulator Economic benchmarking Input data

Agenda Time Item 13: 00 Introduction 13: 15 Model specification 14: 05 Break 14: 20 Measurement of opex 13: 50 Measurement of capital 15: 25 Break 15: 35 Measurement of capital continued 16: 25 Next steps 16: 30 Close

How does this fit into the broader consultation? This is the 6 th workshop on economic benchmarking techniques – one more to come Draft explanatory guidelines in August Final by 29 November

Economic benchmarking workshops Date Subject 13 March DNSP outputs and environmental factors 14 March TNSP outputs and environmental variables 20 March NSP inputs 30 April Measurement – DNSP outputs and environmental variables 2 May Measurement – TNSP outputs and environmental variables 7 May Measurement - NSP inputs 22 May Prescription in the EFA guideline & potential application techniques 30 May Expenditure setting process

Objective of this workshop To discuss data requirements measurement • Is the data list comprehensive? • Are the preliminary definitions suitable? To consider some input specification issues ◦ Easements ◦ Distribution network complexity ◦ System capacity and capital input quantities ◦ The WACC for economic benchmarking of inputs

Objective of next workshop To discuss the role of economic benchmarking in the review of expenditure forecasts • Provide an illustration of its application • Consider practical application issues Discuss the specification of economic benchmarking in the EFA guideline

Overlap with category analysis Some common issues ◦ Cost allocation ◦ Definitions of cost categories Workshop on 16 May to consider shared costs Consistent reporting requirements

Economic Insights presentation

Model specification Discussion points • Treatment of easements • Complexity of different distribution networks • WACC for economic benchmarking

Economic Insights presentation

Opex discussion points AWOTE or WPI? Data requirements • DNSP definitions pg. 14 • TNSP definitions pg. 23

Economic Insights presentation

Capital discussion points Two main components • Asset quantities • Asset costs – RAB depreciation

Capital discussion points Asset quantities • DNSP quantities – pg. 15 • TNSP quantities – pg. 24

Capital discussion points RAB parameters • DNSP – pg. 18 • TNSP – pg. 26