Determination
ActewAGL Distribution
ABN 76 670 568 688
Pass through application for
Australian Capital Territory Electricity Feed-in Tariff Scheme
2011-12
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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January 2013
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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© Commonwealth of Australia 2013
This work is copyright. Apart from any use permitted by the Copyright Act 1968, no part may be
reproduced without permission of the Australian Competition and Consumer Commission. Requests
and inquiries concerning reproduction and rights should be addressed to the Director Publishing,
Australian Competition and Consumer Commission, GPO Box 3131, Canberra ACT 2601.
AER reference: 47276/D12/181643
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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Contents
Contents ........................................................................................................................ ii
Shortened forms ..........................................................................................................iii
Overview ...................................................................................................................... iv
1
Determination ..................................................................................................... 1
2
ActewAGL’s pass through application ............................................................. 2
3
Assessment approach ......................................................................................... 3
4
Reasons for determination ................................................................................. 7
Appendix A ................................................................................................................. 13
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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Shortened forms
Shortened form
Full title
AER
Australian Energy Regulator
ACT
Australian Competition Tribunal
ActewAGL
ActewAGL Distribution ABN 76 670 568 688
CPI
consumer price index
DNSP
distribution network service provider
FiT
feed-in tariff
FiT scheme
ACT Electricity Feed-in Tariff Scheme
NEL
National Electricity Law
NER
National Electricity Rules
RIN
regulatory information notice
WACC
weighted average cost of capital
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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Overview
On 13 November 2012, ActewAGL Distribution ABN 76 670 568 688 (ActewAGL) submitted a
pass through application to the Australian Energy Regulator (AER) in respect of the feed-in tariff
(FiT) payments incurred under the Australian Capital Territory (ACT) Electricity Feed-in Tariff
Scheme (FiT scheme). In its application, ActewAGL proposed a negative pass through amount in
2011–12 of $727 564.
The pass through regime allows distribution network service providers (DNSPs) to pass through
certain costs to customers, representing the difference between the FiT scheme costs estimated in
the determination and the actual costs incurred, subject to certain efficiency standards and other
matters assessed by the AER. The AER must assess the application against the requirements in
clause 6.6.1 of the National Electricity Rules (NER) and the current AER determination currently
applying to ActewAGL.1 In particular, the AER must determine if a pass through event occurred,
and if so, determine an approved pass through amount.
The AER considers that ActewAGL’s pass through application establishes that a pass through
event occurred. The AER notes that ActewAGL is obliged under the Electricity Feed-in (Renewable
Energy Premium) Act 2008 (ACT) to incur direct FiT payments. The AER is satisfied that the
direct FiT payments incurred by ActewAGL in 2011–12 were paid through the operation of the
Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT) and materially reduced
ActewAGL’s costs in providing direct control services in the regulatory control period.
The AER is required by the NER to determine the amount of the pass through amount that should
be passed through in each remaining year of the regulatory control period. Based upon its
assessment of the relevant factors listed in clause 6.6.1(j) of the NER, the AER concludes the
approved negative pass through amount for ActewAGL is $727 564 ($Dec 2013).
1
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, as revoked and substituted in April 2012. See AER, Revocation and substitution of ActewAGL 200914 distribution determination, April 2012.
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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Therefore, the AER has determined that -$727 564 ($Dec 2013) is the approved pass through
amount. This means that in 2013-14 ActewAGL will decrease its approved revenue by $727 564
(a decrease of 0.5% from the determination). For ActewAGL customers the decrease in revenue
will be returned back to customers in the form of lower network charges.
ACT electricity feed-in tariff scheme
The FiT scheme is an ACT Government initiative which commenced on 1 March 2009. It is
designed to reward ACT households and businesses that install renewable energy generation
technology by paying a premium price for the electricity they generate.
The FiT scheme is based on gross generation. For each unit of metered kilowatt hour (kWh)
renewable energy generated (solar or wind), eligible customers are paid at a premium rate greater
than the retail price they would usually pay to buy the same amount of energy. 2 Eligible customers
are guaranteed payment for 20 years at the premium rate in effect at the time their renewable
energy generator is connected to a distributor’s network.3
Originally, the FiT scheme was targeted at householders and small business and limited to
installations up to 30kW in capacity (referred to as the micro generator category). It was
subsequently extended to installations up to 200kW in capacity (referred to as the medium
generator category).
On 13 July 2011, the ACT Government closed the FiT scheme to both micro and mediumgenerators. This means that customers installing renewable energy generators are no longer
eligible for receipt of the ACT feed-in tariff unless they have signed a contract with their installer
and paid a deposit no later than 31 May 2011.
The FiT scheme premium rates are as follows:
2
ACT Department of the Environment, Climate Change, Energy and Water Fact Sheet ‘Solar pays in
Canberra: ACT Electricity Feed-in Tariff Scheme’, March 2011.
3
s. 11 of the Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT).
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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
50.05 cents per kWh for systems up to 10kW from the commencement of the scheme
until 30 June 2010

40.04 cents per kWh for systems between 10kW and 30kW

45.7 cents per kWh for systems up to 30kW from 1 July 2010.
Section 6 of the Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT) makes it a
condition of an electricity distributor’s licence that for eligible FiT scheme customers they must:

connect a renewable energy generator to the distributor’s network to enable electricity
generated by the generator to be supplied to the network; and

reimburse the retailer that supplies electricity to the eligible entity’s premises the
difference between the amount payable for the electricity generated as set out in subsection (3) and the normal cost of that electricity.4
It is also a licence condition that distributors pass onto eligible customers the additional metering
costs in relation to electricity generated by the generator.
Structure of determination
This determination is structured as follows:
4

Chapter 1 – sets out the AER’s determination on ActewAGL’s pass through application

Chapter 2 – sets out ActewAGL’s pass through application

Chapter 3 – sets out the AER’s assessment approach

Chapter 4 – sets out the AER’s reason for the determination.
The level of payment will differ depending upon the category of generator and the date upon which the
eligible customer entered into the contract for the installation of a renewable energy generator.
AER determination| ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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1
Determination
The AER considers that ActewAGL’s pass through application establishes that a pass through
event occurred. The AER is satisfied that the direct FiT payments incurred by ActewAGL in 2011–
12 were paid through the operation of the Electricity Feed-in (Renewable Energy Premium) Act
2008 (ACT) and materially reduce ActewAGL’s costs in providing direct control services in the
regulatory control period.
The AER is required by the NER to determine the amount of the pass through amount that should
be passed through in each remaining year of the regulatory control period. Based upon its
assessment of the relevant factors listed in clause 6.6.1(j) of the NER, the AER concludes the
approved negative pass through amount for ActewAGL’s is $727 564 ($Dec 2013). This means
that in 2013-14 ActewAGL will decrease its approved revenue by $727 564 (a decrease of 0.5%
from the determination). For ActewAGL customers the decrease in revenue will be returned back to
customers in the form of lower network charges.
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2
ActewAGL’s pass through application
On 13 November 2012, the AER received a pass through application from ActewAGL relating to
payments under the FiT scheme. The application seeks the AER’s approval to pass through a
negative pass through amount of $727 564 for 2011-12.
ActewAGL’s application indicates it incurred $10 225 445 ($June 2012) of FiT payments in 201112. The application indicates that the forecast amount of 2011–12 FiT payments included in the
ACT determination was $10 866 637 ($June 2012).
ActewAGL submits the difference of $727 564, when adjusted for inflation and the time value of
money, is the proposed FiT negative pass-through amount. ActewAGL proposes that this amount
be passed back to customers in 2013–14 distribution charges.
In its application ActewAGL provides a report from its accounting system. It also confirms that the
auditor did not find any errors with the 2011–12 FiT payments during the audit of the statutory
accounts.
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3
Assessment approach
The AER is required to consider a pass through application in accordance with clause 6.6.1 of the
NER.
3.1
Relevant regulatory requirements
The AER received ActewAGL’s application on 13 November 2012 and, therefore, is applying the
NER that applied on this date.5
The clauses of the NER which the AER had regard to when making its determination are outlined
in appendix A. In particular, the relevant factors that the AER must take into account when making
a pass through determination are set out in clause 6.6.1(j) of the NER:
Relevant factors
(j) In making a determination under paragraph (d) or (g) in respect of a Distribution Network Service
Provider, the AER must take into account:
(1)
the matters and proposals set out in any statement given to the AER by the provider
under paragraph (c) or (f); and
(2)
in the case of a positive change event, the increase in costs in the provision of direct
control services that, as a result of the positive change event, the provider has incurred and is
likely to incur until:
(i) unless subparagraph (ii) applies – the end of the regulatory control period in which
the positive change event occurred; or
(ii) if the distribution determination for the regulatory control period following that in which
the positive change event occurred does not make any allowance for the recovery of that
increase in costs – the end of the regulatory control period following that in which the
positive change event occurred; and
5
The AER notes that version 52 of the NER applied during the period in which ActewAGL’s application
was received.
AER determination | ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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(2A)
in the case of a negative change event, the costs in the provision of direct control
services that, as a result of the negative change event, the provider has saved and is likely to
save until:
(i)
unless subparagraph(ii) applies – the end of the regulatory control period in which the
negative change event occurred; or
(ii) if the distribution determination for the regulatory control period following that in which
the negative change event occurred does not make any allowance for the pass through of
those cost savings to Distribution Network Users – the end of the regulatory control period
following that in which the negative change event occurred; and
(3)
in the case of a positive change event, the efficiency of the provider's decisions and
actions in relation to the risk of the positive change event, including whether the provider has
failed to take any action that could reasonably be taken to reduce the magnitude of the eligible
pass through amount in respect of that positive change event and whether the provider has
taken or omitted to take any action where such action or omission has increased the magnitude
of the amount in respect of that positive change event; and
(4)
the time cost of money based on the weighted average cost of capital for the provider
for the regulatory control period in which the pass through event occurred; and
(5)
the need to ensure that the provider only recovers any actual or likely increment in
costs under this paragraph (j) to the extent that such increment is solely as a consequence of
a pass through event; and
(6)
in the case of a tax change event, any change in the way another tax is calculated, or
the removal or imposition of another tax, which, in the AER's opinion, is complementary to the
tax change event concerned; and
(7)
whether the costs of the pass through event have already been factored into the
calculation of the provider's annual revenue requirement for the regulatory control period in
which the pass through event occurred or will be factored into the calculation of the provider's
annual revenue requirement for a subsequent regulatory control period; and
7A
the extent to which the costs that the provider has incurred and is likely to incur are
the subject of a previous determination made by the AER under this clause 6.6.1; and
(8)
any other factors the AER considers relevant.
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3.2
Assessment approach
When assessing ActewAGL’s negative pass through application, pursuant to the NER, the AER
must first determine whether a ‘negative change event’ occurred. This assessment is done with
reference to the NER and the current AER determination applicable to the applicant ActewAGL
(which defines the pass through events which ActewAGL can utilise during the regulatory control
period). The AER, as part of this process, also determines the materiality of the proposed past
through amount. Under chapter 10 of the NER a negative change event for a DNSP is defined as:
a pass through event that materially reduces the costs of providing direct control services.
Once the AER determines that a negative change event has occurred it must then determine: 6
(1)
the required pass through amount; and
(2) taking into account the matters referred to in paragraph (j):
(i) how much of that required pass through amount should be passed through to
Distribution Network Users (the "negative pass through amount"); and
(ii) the amount of that negative pass through amount that should be passed through to
Distribution Network Users in the regulatory year in which, and each regulatory year after
that in which, the negative change event occurred.
The AER makes this determination taking into account those factors set out in clause 6.6.1(j) of
the NER (quoted above).
3.3
What the AER considered in making this determination
The AER’s determination has been made in accordance with clause 6.6.1 of the NER.
In forming its determination, the AER has:

6
considered the application and supporting information it received from ActewAGL
NER, clause 6.6.1(g).
AER determination | ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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
considered information provided by ActewAGL on 5 December 2012 in response to an
information request from the AER7

7
undertaken its own analysis to verify the information provided by ActewAGL.
This additional information related to the methodology ActewAGL used to reconcile the FiT payments
identified in its application to those contained in the RIN and the timing of ActewAGL’s application.
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4
Reasons for determination
The AER is satisfied that ActewAGL’s pass through application establishes that a pass through
event occurred. The AER considers the direct FiT payments incurred by ActewAGL in 2011–12
materially reduce ActewAGL’s costs in providing direct control services in the regulatory control
period, as required under clause 6.6.1(j)(2A) of the NER.
4.1
Occurrence of a pass through event
Chapter 16 of the AER’s Final Australian Capital Territory distribution determination decision 2009–
10 to 2013–14 deals with pass through arrangements. In this determination a ‘Feed-in tariff direct
payment event’ is regarded as a specific nominated pass through event. A ‘Feed–in tariff direct
payment event’ is defined as:8
Feed-in tariff direct payment event means a change in the total amount of direct feed–in tariff direct
tariff payments paid by ActewAGL in respect of the ACT Feed-in tariff scheme. For the purpose of this
definition, the change in the amount of direct tariff payments paid by ActewAGL must be calculated as
the difference between:
(1) the amount of direct tariff payments paid by ActewAGL in each regulatory year of the next
regulatory control period, derived from the metered output of generators subject to the scheme,
and the applicable feed–in tariff rate applying to the metered output; and
(2) the amount of scheme direct tariff payments which were forecast for the purpose of and included
in the ACT distribution determination for each regulatory year of the next regulatory control
period.
Relevant direct tariff payments under this pass through mechanism are those paid through the
operation of the Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT), and any
amendments to this Act, or through the operation of a new Act implementing the expected second
stage of the scheme applying to larger generators.
8
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, pp. 131-132, as revoked and substituted in April 2012. See AER, Revocation and substitution of
ActewAGL 2009-14 distribution determination, April 2012.
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4.1.1
Direct feed-in tariff payments
The AER is satisfied that the direct payments incurred by ActewAGL in 2011–12, as set out in its
pass through application, arise out of the operation of the FiT scheme. The FiT scheme is
established under the Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT). This
legislation makes it a condition of an electricity distributor’s licence that they must connect eligible
FiT scheme customers and reimburse the retailer for the electricity generated. 9
4.1.2
Materiality
Chapter 10 of the NER defines a negative change event for a distribution network service provider
as:
a pass through event that materially reduces the costs of providing direct control services.
In the AER’s Final ACT distribution determination decision 2009–10 to 2013–14, the AER stated
that a pass through event will have a material impact if the costs associated with the event exceed
one per cent of the annual smoothed revenue requirement specified in the final decision in the
years of the regulatory control period that the costs are incurred. However, the AER also stated
that a lower materiality threshold, representing the administrative costs of assessing the application,
may be appropriate for specific nominated pass through events.10 The AER notes that the ‘feed-in
tariff direct payment event’ falls within this category and, therefore, is subject to a lower materiality
threshold.
Consistent with the final determination, the AER applied a materiality threshold for a specific
nominated event that reflects the administrative costs of assessing the application. As set out in
table 4.1 below, the proposed pass through amount equates to approximately 0.5% per cent of
ActewAGL’s annual revenue requirement for 2011-12 as determined by the AER. in its
9
s. 6 of the Electricity Feed-in (Renewable Energy Premium) Act 2008 (ACT).
10
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, p. 130, as revoked and substituted in April 2012. See AER, Revocation and substitution of
ActewAGL 2009-14 distribution determination, April 2012.
AER determination | ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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determination.11 The AER is satisfied that the negative pass through amount of $727 564 proposed
by ActewAGL meets the administration cost threshold for specific nominated pass through events.
Table 4.1: FiT pass through amounts as a proportion of ActewAGL’s annual revenue
requirement for 2011-12
ActewAGL’s proposed FiT
Annual revenue
Proposed pass through
pass through amount
requirement for 2011–12
amount as % of
ActewAGL’s annual
revenue requirement
ActewAGL
$0.7
$160.6 million
0.5%
Source: AER analysis
The AER considers the direct FiT payments incurred by ActewAGL under the FiT scheme reduce
the costs of providing direct control services. This is because the activities which ActewAGL
undertakes in order to comply with its obligations under the FiT scheme relate to direct control
services as defined in s. 2B of the National Electricity Law (NEL). For example, ActewAGL
undertakes network operation, monitoring and metering activities, as part of the FiT scheme.
4.1.3
Timing of ActewAGL’s application
Clause 6.6.1 of the NER requires DNSPs to submit a pass through application to the AER within
90 business days of becoming aware of the occurrence of a negative change event, or alternatively
within 90 business days of the positive change event occurring.
ActewAGL considers the trigger date for the pass through application to be the date upon which it
obtained final metered output data for 2011–12. This date occurs in October 2012 and follows
ActewAGL confirming the 2011–12 data from the September 2012 meter reading cycle. ActewAGL
maintains that under the definition of ‘Feed-in tariff direct payment event’ contained in the
11
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, as revoked and substituted in April 2012. See AER, Revocation and substitution of ActewAGL 200914 distribution determination, April 2012, p. 12.
AER determination | ActewAGL pass through application for ACT electricity feed-in tariff scheme 2011-12
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determination, it is necessary to use the metered output to determine the actual FiT payment
amount.12
The AER accepts that it is open for ActewAGL to consider that the negative change event occurred
in October 2012 when final metered output data for 2011–12 became available. Accordingly, the
AER is satisfied that ActewAGL submitted its pass through application within 90 business days of
the negative change event occurring.
4.2
Assessment of the pass through amount
In considering ActewAGL’s pass through application, the AER took into account those factors set
out in clause 6.6.1(j) of the NER. Each of these factors is discussed below.
4.2.1
Matters and proposals set out by ActewAGL
The AER reviewed ActewAGL’s application and supporting information. The AER made its
determination based on the matters and proposals set out by ActewAGL.
4.2.2
The costs ActewAGL has saved as a result of the pass through event
The AER substantiated the actual FiT scheme values used to calculate the negative pass through
amount sought by ActewAGL. This was done by checking the proposed pass through amount
against the FiT payments reported in ActewAGL’s 2011–12 regulatory information notice (RIN) and
additional information provided by ActewAGL.
4.2.3
Time cost of money
Clause 6.6.1(j)(4) of the NER requires the AER to take into account the time cost of money based
on the weighted average cost of capital (WACC) for the provider. In calculating the pass through
amount, the AER has made an allowance for the time cost of money.
12
ActewAGL provided this information to the AER on 5 December 2012 in response to an AER information
request.
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Time cost of money has been based upon the WACC for ActewAGL, as set out in the AER’s Final
Australian Capital Territory distribution determination decision 2009–10 to 2013–14. This is a
nominal vanilla WACC of 8.79%.13 The AER applied WACC for 1.5 years as revenue will be
recouped, on average, halfway through the year when the adjusted prices apply (i.e. 31 December
2013).
4.2.4
Recovery of costs solely a consequence of the pass through event
The AER considers that ActewAGL’s proposed pass through amount only includes incremental
costs that are solely attributed to the direct FiT payments it has incurred. ActewAGL’s direct FiT
payments have been verified through its RIN for 2011–12.
4.2.5
Whether the costs have already been factored into ActewAGL’s annual revenue
requirement
In the AER’s Final Australian Capital Territory distribution determination decision 2009–10 to
2013–14, the AER determined that ActewAGL’s FiT scheme forecast operating expenditure for
2011–12 was $10 million ($2008–09).14
ActewAGL’s application identified the difference between the actual direct FiT payments it incurred
in 2011–12 and those forecast in the final determination, as being an over recovery of $641 191.
ActewAGL is proposing to pass through this difference which, when adjusted for the inflation and
the time value of money, is the amount of $727 564.
The AER agrees that the difference between the forecast and actual direct FiT payments was not
provided for in the AER’s Final Australian Capital Territory distribution determination decision
2009–10 to 2013–14. The AER in its determination considered it appropriate for ActewAGL to
recover or return to users any difference between forecast and actual direct tariff payments through
13
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, p. 109, as revoked and substituted in April 2012. See AER, Revocation and substitution of
ActewAGL 2009-14 distribution determination, April 2012.
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a nominated pass through event. This was on the basis that the ActewAGL did not have time to
test the accuracy of its direct tariff payment forecasts or develop its forecasts with the benefit of
actual data.15
4.2.6
Extent the costs are subject of a previous determination made by the AER
under clause 6.6.1 of the NER
The AER considers that ActewAGL’s proposed pass through amount is not part of a previous pass
through determination by the AER under clause 6.6.1 of the NER. In this regard, the AER notes
that ActewAGL made a pass through application associated with the occurrence of a feed-in tariff
event in November 2011 for a negative pass through amount in the 2010–2011 regulatory year. In
December 2011, the AER approved a negative pass through amount of $3 918 484 to be passed
through the distribution charges for 2012–13.
4.2.7
Any other factors the AER considers relevant
There are no other factors the AER considers relevant in making its determination on the pass
through amount.
15
AER, Final Australian Capital Territory distribution determination decision 2009-10 to 2013-14, 28 April
2009, pp. 130-131, as revoked and substituted in April 2012. See AER, Revocation and substitution of
ActewAGL 2009-14 distribution determination, April 2012.
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Appendix A
Excerpt from version 52 of the NER – clause 6.6.1:
6.6.1 Cost pass through
(a1) Any of the following is a pass through event for a distribution determination:
(1) a regulatory change event;
(2) a service standard event;
(3) a tax change event;
(4) a retailer insolvency event; and
(5) any other event specified in a distribution determination as a pass through event for the
determination.
(a) If a positive change event occurs, a Distribution Network Service Provider may seek the approval
of the AER to pass through to Distribution Network Users a positive pass through amount.
(b) If a negative change event occurs, the AER may require the Distribution Network Service Provider
to pass through to Distribution Network Users a negative pass through amount as determined by the
AER under paragraph (g).
Positive pass through
(c) To seek the approval of the AER to pass through a positive pass through amount, a Distribution
Network Service Provider must submit to the AER, within 90 business days of the relevant positive
change event occurring, a written statement which specifies:
(1) the details of the positive change event; and
(2) the date on which the positive change event occurred; and
(3) the eligible pass through amount in respect of that positive change event; and
(4) the positive pass through amount the provider proposes in relation to the positive change
event; and
(5) the amount of the positive pass through amount that the provider proposes should be
passed through to Distribution Network Users in the regulatory year in which, and each
regulatory year after that in which, the positive change event occurred;
(6) evidence:
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(i) of the actual and likely increase in costs referred to in subparagraph (3); and
(ii) that such costs occur solely as a consequence of the positive change event; and
(iii) in relation to a retailer insolvency event, of :
(A)
the amount to which the Distribution Network Service Provider is entitled
under any relevant credit support; and
(B)
the maximum amount of credit support (if any) that the Distribution Network
Service Provider was entitled to request the retailer to provide under the credit support
rules; and
(C)
any amount that the Distribution Network Service Provider is likely to
receive on a winding-up of the retailer; and
(7) such other information as may be required under any relevant regulatory information
instrument.
(d) If the AER determines that a positive change event has occurred in respect of a statement under
paragraph (c), the AER must determine:
(1)
the approved pass through amount; and
(2)
the amount of that approved pass through amount that should be passed through to
Distribution Network Users in the regulatory year in which, and each regulatory year after that
in which, the positive change event occurred,
taking into account the matters referred to in paragraph (j).
(e) If the AER does not make the determinations referred to in paragraph (d) within 60 business days
from the date it receives the Distribution Network Service Provider's statement and accompanying
evidence under paragraph (c), then, on the expiry of that period, the AER is taken to have determined
that:
(1)
the positive pass through amount as proposed in the provider's statement under
paragraph (c) is the approved pass through amount in respect of that positive change event;
and
(2)
the amount of that positive pass through amount that the provider proposes in its
statement under paragraph(c) should be passed through to Distribution Network Users in the
regulatory year in which, and each regulatory year after that in which, the positive change
event occurred, is the amount that should be so passed through in each such regulatory year.
Negative pass through
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(f) A Distribution Network Service Provider must submit to the AER, within 90 business days of
becoming aware of the occurrence of a negative change event for the provider, a written statement
which specifies:
(1) the details of the negative change event concerned; and
(2) the date the negative change event occurred; and
(3) the costs in the provision of direct control services that the provider has saved and is likely
to save as a result of the negative change event until:
(i) unless subparagraph (ii) applies – the end of the regulatory control period in which the
negative change event occurred; or
(ii) if the distribution determination for the regulatory control period following that in which
the negative change event occurred does not make any allowance for the pass through of
those cost savings - the end of the regulatory control period following that in which the
negative change event occurred; and
(4) the aggregate amount of those saved costs that the provider proposes should be passed
through to Distribution Network Users; and
(5) the amount of the costs referred to in subparagraph (4) the provider proposes should be
passed through to Distribution Network Users in the regulatory year in which, and each
regulatory year after that in which, the negative change event occurred; and
(6) such other information as may be required under any relevant regulatory information
instrument.
(g) If a negative change event occurs (whether or not the occurrence of that negative change event is
notified by the provider to the AER under paragraph (f)) and the AER determines to impose a
requirement on the provider in relation to that negative change event as described in paragraph (b),
the AER must determine:
(1) the required pass through amount; and
(2) taking into account the matters referred to in paragraph (j):
(i) how much of that required pass through amount should be passed through to
Distribution Network Users (the "negative pass through amount"); and
(ii) the amount of that negative pass through amount that should be passed through to
Distribution Network Users in the regulatory year in which, and each regulatory year after
that in which, the negative change event occurred.
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(h) A Distribution Network Service Provider must provide the AER with such information as the AER
requires for the purpose of making a determination under paragraph (g) within the time specified by
the AER in a notice provided to the provider by the AER for that purpose.
Consultation
(i)
Before making a determination under paragraph (d) or (g), the AER may consult with the
relevant Distribution Network Service Provider and such other persons as the AER considers
appropriate, on any matters arising out of the relevant pass through event the AER considers
appropriate.
Relevant factors
(j) In making a determination under paragraph (d) or (g) in respect of a Distribution Network Service
Provider, the AER must take into account:
the matters and proposals set out in any statement given to the AER by the provider
(1)
under paragraph (c) or (f); and
in the case of a positive change event, the increase in costs in the provision of direct
(2)
control services that, as a result of the positive change event, the provider has incurred and is
likely to incur until:
(i) unless subparagraph (ii) applies – the end of the regulatory control period in which
the positive change event occurred; or
(ii) if the distribution determination for the regulatory control period following that in which
the positive change event occurred does not make any allowance for the recovery of that
increase in costs – the end of the regulatory control period following that in which the
positive change event occurred; and
(2A)
in the case of a negative change event, the costs in the provision of direct control
services that, as a result of the negative change event, the provider has saved and is likely to
save until:
(iii) unless subparagraph(ii) applies – the end of the regulatory control period in which the
negative change event occurred; or
(iv) if the distribution determination for the regulatory control period following that in which
the negative change event occurred does not make any allowance for the pass through of
those cost savings to Distribution Network Users – the end of the regulatory control period
following that in which the negative change event occurred; and
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(3)
in the case of a positive change event, the efficiency of the provider's decisions and
actions in relation to the risk of the positive change event, including whether the provider has
failed to take any action that could reasonably be taken to reduce the magnitude of the eligible
pass through amount in respect of that positive change event and whether the provider has
taken or omitted to take any action where such action or omission has increased the magnitude
of the amount in respect of that positive change event; and
(4)
the time cost of money based on the weighted average cost of capital for the provider
for the regulatory control period in which the pass through event occurred; and
(5)
the need to ensure that the provider only recovers any actual or likely increment in
costs under this paragraph (j) to the extent that such increment is solely as a consequence of
a pass through event; and
(6)
in the case of a tax change event, any change in the way another tax is calculated, or
the removal or imposition of another tax, which, in the AER's opinion, is complementary to the
tax change event concerned; and
(7)
whether the costs of the pass through event have already been factored into the
calculation of the provider's annual revenue requirement for the regulatory control period in
which the pass through event occurred or will be factored into the calculation of the provider's
annual revenue requirement for a subsequent regulatory control period; and
7A
the extent to which the costs that the provider has incurred and is likely to incur are
the subject of a previous determination made by the AER under this clause 6.6.1; and
(8)
any other factors the AER considers relevant.
Extension of time limits
(k) The AER must, by written notice to a Distribution Network Service Provider, extend a time limit
fixed in clause 6.6.1(c) or clause 6.6.1(f) if the AER is satisfied that the difficulty of assessing or
quantifying the effect of the relevant pass through event justifies the extension.
retailer insolvency event
(l) For the purposes of calculating the eligible pass through amount in relation to a positive change
event which is a retailer insolvency event, the increase in costs is the retailer insolvency costs
excluding:
(i) any amount recovered or recoverable from a retailer or a guarantor of a retailer under any
relevant credit support; and
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(ii) amounts that the Distribution Network Service Provider is likely to receive on a winding-up
of the retailer; and
(iii) any costs that are recoverable under a RoLR cost recovery scheme distributor payment
determination.
(m) The amount the AER determines should be passed through to Distribution Network Users in
respect of a retailer insolvency event must be taken to be a cost that can be passed through and not a
revenue impact of the event.
Excerpt from version 52 of the NER – chapter 10:
approved pass through amount
In respect of a positive change event for a Transmission Network Service Provider:
(a) the amount which the AER determines should be passed through to Transmission Network
Users under clause 6A.7.3(d)(2); or
(b) the amount which the AER is taken to have determined under clause 6A.7.3(e)(1),
as the case may be.
In respect of a positive change event for a Distribution Network Service Provider:
(a) the amount the AER determines should be passed through to Distribution Network Users
under clause 6.6.1(d)(2); or
(b) the amount the AER is taken to have determined under clause 6.6.1(e)(1),
as the case may be.
eligible pass through amount
In respect of a positive change event for a Transmission Network Service Provider, the
increase in costs in the provision of prescribed transmission services that, as a result of that
positive change event, the Transmission Network Service Provider has incurred and is likely to
incur (as opposed to the revenue impact of that event) until:
(a) unless paragraph(b) applies – the end of the regulatory control period in which the positive
change event occurred; or
(b) if the transmission determination for the regulatory control period following that in which the
positive change event occurred does not make any allowance for the recovery of that increase
in costs (whether or not in the forecast operating expenditure or forecast capital expenditure
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accepted or substituted by the AER for that regulatory control period) – the end of the
regulatory control period following that in which the positive change event occurred.
In respect of a positive change event for a Distribution Network Service Provider, the increase
in costs in the provision of direct control services that, as a result of that positive change event,
the Distribution Network Service Provider has incurred and is likely to incur (as opposed to the
revenue impact of that event) until:
(a) unless paragraph(b) applies – the end of the regulatory control period in which the positive
change event occurred; or
(b) if the distribution determination for the regulatory control period following that in which the
positive change event occurred does not make any allowance for the recovery of that increase
in costs (whether or not in the forecast operating expenditure or forecast capital expenditure
accepted or substituted by the AER for that regulatory control period) – the end of the
regulatory control period following that in which the positive change event occurred.
negative change event
For a Transmission Network Service Provider, a pass through event which entails the
Transmission Network Service Provider incurring materially lower costs in providing prescribed
transmission services than it would have incurred but for that event.
For a Distribution Network Service Provider, a pass through event that materially reduces the
costs of providing direct control services.
negative pass through amount
In respect of a negative change event for a Transmission Network Service Provider, an amount
that is not greater than a required pass through amount as determined by the AER under
clause 6A.7.3(g).
In respect of a negative change event for a Distribution Network Service Provider, an amount
that is not greater than a required pass through amount as determined by the AER under
clause 6.6.1(g).
pass through event
For a distribution determination - the events specified in clause 6.6.1(a1)
For a transmission determination – the events specified in clause 6A.7.3(a1).
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