Average network charges for households in NSW from 1 July 2015 will still be above Victoria average and compare poorly internationally 3 Source: EPRI, AER Draft Decision, Ofgem RIIO ED1 proposals, OECD (for PPP exchange rates), CME analysis
NSW’s DNSPs have delivered remarkable pecuniary gains to their owner 4 * 2013/14 not included because interest rate data needed to calculate competitive neutrality fees no longer available In 2012/13 NSW distributors’ pecuniary benefit per connection was 5.6 times higher than UK Power Networks’ pre-tax profit per connection.
5 After the AER’s DD, AusGrid’s revenues will still be (much) higher than IPART allowed IPARTAER
6 Likewise for Endeavour too (although gap not as large)
And Essential’s increases relative to IPART’s last decision, much like AusGrid 7
WACC: some progress, but still higher than IPART and even more so Ofgem. Why ? 8 * All Australian decisions rebased to use consistent 2014 Risk Free Rate
Summary of key points From CCP’s perspective, AER DD should set the high water mark for revenues, assets, WACC and expenditure. Compromises have already been made and back- tracking from here would be unwise. Opex and capex allowance seem roughly reasonable although some “adjustments” to the benchmarking to narrow the VIC-NSW gap is problematic and needs to be addressed. Allowance for Debt is too high. BBB calculations that do not reflect actual DNSP borrowing costs are flawed. The AER must have regard to actual borrowing costs. NSW DNSPs have recognised the significant inefficiencies that consumers have been pointing to for years. However, despite excessive costs, the regulatory outcomes have nonetheless delivered excessive profits. This must end. Shareholders, not consumers, must bear the consequence of inefficiency. 19