AER announces TransGrid’s revenue determination for 2014-15

The Australian Energy Regulator (AER) has recently announced its determination on TransGrid's Transitional Revenue Proposal for the 2014/15 year


This is a "placeholder" Revenue Proposal for the 2014/15 year, following some recent rule changes in 2012.  The Transitional Revenue Proposal will effectively be set aside when the AER makes its decision on the Full Revenue Proposal, which will be submitted at the end of May 2014.

Every five years, the AER assesses our Revenue Proposal and Five Year Business Plan, determining exactly how much we can collect from consumers to run the business in the coming period. The AER also regulates other network providers such as Ausgrid, Transend, Endeavour Energy and Powerlink, in the same way.

By ensuring our Revenue Proposal and Five Year Business Plan are accurate, we secure funding for both our daily operations and capital projects.  This is balanced with continuing to provide a safe and reliable electricity transmission network, while keeping in mind NSW's electricity consumers, who pay TransGrid's revenue through their electricity bills.

TransGrid's allowed revenue for 2014/15 will be $845.4 million, which is 9% lower than TransGrid proposed. This reduction is based on the AER's decision on the cost of debt and equity i.e. the business' weighted average cost of capital or WACC. 

The mix of capital expenditure is significantly different in these proposals than any period in TransGrid's recent history. As many of the assets built during the 1950s and 1960s are reaching the end of their serviceable lives, replacement expenditure has increased while load driven investment is smaller. The AER will assess the capital and operation expenditure forecasts as part of the Full Revenue Proposal determination due in April 2015.

 

Highlights of the Transitional Revenue Proposal

  • Ensuring electricity transmission prices are no higher than necessary whilst maintaining reliability standards
  • An investment program responsive to the changing environment and consumer demand
  • Continuous improvements in operating efficiency
  • Reduced capital investment program (build options)
  • Efficient replacement program for ageing assets
  • Focus on demand management initiatives
  • Comprehensive consumer engagement program
TransGrid will continue to consult with stakeholders throughout NSW and the ACT on our future plans. 

Related Documents

Transitional Revenue Reset Proposal
Transitional Revenue Reset Proposal - Appendix