Framework for Assessing Capex and Opex Forecasts as Part of a “Building Blocks” Approach to Revenue/Price Determinations
Prepared for the Australian Energy Market Commission
The Australian Energy Regulator (AER) recently proposed a change to the National Electricity Rules (the Rules) that address capital expenditure (capex) and operating expenditure (opex) allowances, and how forecasts submitted by a network business are to be examined by the AER in making an electricity distribution or transmission determination. In connection with this rule change request, the Australian Energy Market Commission (AEMC) asked us to review regulatory practice addressing this topic in a range of regulatory jurisdictions, and to make comparisons with the practice of the AER. The objectives of our study are to describe the relevant rules and practices in each jurisdiction, to determine on the basis of this experience across jurisdictions whether the policy intent behind Chapter 6A of the Rules remains consistent with good practice, and to recommend possible improvements.
