Submission in response to the AER’s draft Rate of Return Guideline

On 10 July 2018, the Australian Energy Regulator (AER) released a consultation paper to facilitate consultation on its review of the Rate of Return Guideline. A copy of the consultation and background is available here.

The Rate of Return for networks is the return on investment that monopoly network businesses require to attract finance, and makes up approximately 50 per cent of a network business’ allowed revenue. Given the increased size of the regulated asset base (RAB) of most of the electricity and gas, distribution and transmission business, the regulated rate of return as determined by the AER’s draft Guideline is now the largest single driver of network prices.

AGL participated in the Retailer Reference Group (RRG) conducted by the AER during its the development of its draft Guideline and appreciated the extensive consultation and stakeholder engagement. We generally support the draft Guideline and believe it has found a reasonable balance between providing an appropriate rate of return that compensates the regulated businesses for their low-risk capital investments whilst ensuring consumers are not paying inflated network charges. AGL made a submission in response to the Guideline, a copy of which is available here.