1. Measuring NSP Inputs for Economic Benchmarking AER Economic Benchmarking Workshop #6 7 May 2013 Denis Lawrence and John Kain

2. www.economicinsights.com.au 2 GENERAL ISSUES

3. www.economicinsights.com.au 3 Main Issue Data requirements Are there any variables missing from tables 2 (for DNSPs) and 3 (for TNSPs) in section 3.2 that should be there? Are the definitions proposed appropriate for economic benchmarking? Should any of the definitions be altered to ensure consistency across DNSPs and across TNSPs, respectively?

4. www.economicinsights.com.au 4 Other Issues Distribution cost coverage Opex price index EGWW sector AWOTE or WPI – 62.0 per cent Intermediate inputs – domestic PPI – 19.5 per cent Data processing, web hosting and electronic information storage PPI – 8.2 per cent Other administrative services – 6.3 per cent Legal and accounting PPI – 3.0 per cent, and Market research and statistical services PPI – 1.0 per cent

5. www.economicinsights.com.au 5 AWOTE vs WPI

6. www.economicinsights.com.au 6 Other Issues (cont’d) Easements Distribution network complexity System capacity and capital input quantities WACC for use in economic benchmarking

7. www.economicinsights.com.au 7 OPEX INPUTS

8. www.economicinsights.com.au 8 Opex Specification #1 QuantityValuePrice Nominal opex / Weighted average price index Opex (for network services group adjusted to remove accounting items not reflecting input use that year) Weighted average of ABS EGWW AWOTE labour index and five ABS producer price indexes

9. www.economicinsights.com.au 9 Opex Specification #2 QuantityValuePrice Nominal opex / Weighted average price index Opex (for network services group adjusted to remove accounting items not reflecting input use that year) Weighted average of ABS EGWW WPI labour index and five ABS producer price indexes

10. www.economicinsights.com.au 10 CAPITAL INPUTS

11. www.economicinsights.com.au 11 Capital Specification #1 QuantityValuePrice O/H MVA-kms U/G MVA-kms Transformers & other KVA Return of & on O/H capital Return of & on U/G capital Return of & on Trf & other capital O/H AUC / MVA-kms U/G AUC / MVA-kms Trf & other AUC / KVA

12. www.economicinsights.com.au 12 Capital Specification #2 QuantityValuePrice Nominal RAB Depreciation / ABS CGPI Return of & on capitalAUC / Const price RAB depreciation

13. www.economicinsights.com.au 13 Capital Specification #3 QuantityValuePrice Nominal depreciated RAB / ABS CGPI Revenue minus opexAUC / Const price depreciated RAB