Determination
Ergon Energy Corporation Limited
ACN 087 646 062
Pass through application for
Queensland solar bonus scheme 2011-12
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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January 2013
AER determination| Ergon Energy pass through application for Queensland solar bonus 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/D12/181641
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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Contents
Contents ...................................................................................................................................... ii
Shortened forms......................................................................................................................... iii
Overview .................................................................................................................................... iv
1
Determination ...................................................................................................................1
2
Ergon Energy’s pass through application ..........................................................................2
3
Assessment approach .......................................................................................................3
4
Reasons for determination ................................................................................................ 7
Appendix A ................................................................................................................................ 14
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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Shortened forms
Shortened form
Full title
AER
Australian Energy Regulator
ACT
Australian Competition Tribunal
CPI
consumer price index
DNSP
distribution network service provider
Ergon Energy
Ergon Energy Corporation Limited ACN 087 646 062
FiT
feed-in tariff
NEL
National Electricity Law
NER
National Electricity Rules
QCA
Queensland Competition Authority
RIN
regulatory information notice
SBS
Queensland Solar Bonus Scheme
WACC
weighted average cost of capital
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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Overview
On 5 November 2012, Ergon Energy Corporation Limited ACN 087 646 062 (Ergon Energy)
submitted a pass through application to the Australian Energy Regulator (AER) in respect of the
feed-in tariff (FiT) payments incurred under the Queensland Solar Bonus Scheme (SBS). In its
application, Ergon Energy proposed a positive pass through amount in 2011–12 of
$27 808 270.
The pass through regime allows distribution network service providers (DNSPs) to pass through
certain costs to customers, representing the difference between the SBS scheme costs estimated in
the determination and the actual costs incurred, subject to certain efficiency standards and other
matters assessed by the AER. Under its current determination, Ergon Energy is entitled to submit a
feed-in tariff pass through application to the AER for assessment. The AER must assess the
application against the requirements outlined in clause 6.6.1 of the National Electricity Rules (NER)
and the current AER determination currently applying to Ergon Energy.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 Ergon Energy’s pass through application establishes that a pass through
event occurred. The AER notes that Ergon Energy is obliged under the Electricity Act 1994 (Qld)
to incur direct FiT payments. The AER is satisfied that the direct FiT payments incurred by Ergon
Energy in 2011–12 were paid through the operation of the Electricity Act 1994 (Qld) and materially
increased Ergon Energy’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 pass through amount for Ergon Energy is $27 808 270 ($Dec 2013).
1
AER, Final Decision: Queensland distribution determination 2010–11 to 2014–15, May 2010.
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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The AER has determined that $27 808 270 ($Dec 2013) is the approved pass through amount.
This means that in 2013-14 Ergon Energy will increase its approved revenue by $27 808 270 (an
increase of two percent from the determination). For Ergon Energy customers the increase in
revenue can be recovered from customers through higher network charges.
The increased feed-in costs in Queensland reflect the fact that consumer participation in the SBS
(through the installation of photo-voltaic systems, or solar panels) has been significantly greater
than was forecast. These forecasts were made by Ergon Energy when the current determination
was decided. At that time, the SBS was a relatively new initiative and there was little historical data
upon which Ergon Energy could rely to make their forecasts. In fact, consumer participation in the
SBS has been substantial. Participation in the scheme also increased rapidly following the
announcement of the Queensland Government on 26 June 2012 to close the existing scheme to
new applications from midnight on 9 July 2012.
The Queensland Competition Authority, in a recent review of the SBS, estimated that at the peak of
its impact in 2015-16, the costs of the SBS will add $120 to an average Tariff 11 (residential retail
tariff) customers’ annual electricity bill. 2
Queensland solar bonus scheme
The SBS is a Queensland Government initiative which came into effect on 1 July 2008. It provides
eligible customers with credit for the surplus electricity, generated by solar photovoltaic (PV) panel
systems, which is exported into the Queensland electricity grid. It is designed to make solar power
more affordable for Queenslanders, stimulate the solar power industry and encourage energy
efficiency.3
2
Queensland Competition Authority, Draft Report- Estimating a Fair and Reasonable Solar Feed-in Tariff for
Queensland, November 2012, pp. 53-54. The final report is due to the Minister on 22 March 2013.
3
Queensland Department of Energy and Water Supply Fact Sheet, ‘Changes to the Solar Bonus Scheme’,
updated on 27 June 2012.
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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The SBS is available to small residential and business customers who consume less than 100MWh
per year, with grid-connected PV panel systems not exceeding 5kW capacity. Customers can
recover the costs of installing a PV panel system via a feed-in tariff paid for by the surplus
electricity their PV panel system exports into the grid.
At the end of each billing period, the customer's meter is read to determine the total amounts of
surplus electricity exported to and imported from, the grid. The DNSP provides this data to the
customer’s retailer, which then calculates the amount of the 'solar bonus' by multiplying the number
of kWh exported by the rate of the feed-in tariff (which is set by the Queensland Government). The
solar bonus amount is deducted from the customer's consumption charge for imported electricity. If
the value of the customer’s exports exceeds their consumption their retail account is credited.
Section 44A of the Electricity Industry Act 1994 (Qld) imposes a condition on DNSPs to allow
credit for electricity produced by small PV generators at the prescribed amount. Accordingly, under
the SBS the retailer recovers the cost of crediting customer accounts from the DNSPs. The DNSP
then passes the cost onto customers through its network pricing.
Recent changes to the SBS
Customers who lodged an application to participate in the SBS on or before 9 July 2012 receive a
payment of 44c/kWh for surplus electricity fed into the grid.
On 26 June 2012, the Queensland Energy Minister, Mark McArdle, announced changes to the
SBS.4 These changes included:

The scheme closing to new applications effective from midnight on 9 July 2012

A replacement FiT of 8c/kWh applying from 10 July 2012 and ending on 1 July 2014,
pending a further review of the scheme
4
Minister for Energy and Water Supply, the Honourable Mark McArdle, Media Statement on ‘Changes to
Queensland Solar Bonus Scheme Announced’, June 26, 2012.
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
Existing Solar Bonus Scheme participants continuing to receive the current 44c/kWh
FiT as long as they continue to meet eligibility criteria, and

The Queensland Competition Authority (QCA) conducting a review and making
recommendations by early 2013 on a subsidy free ‘fair and reasonable’ solar FiT for
Queensland.
The QCA review is currently under way. An issues paper was released in August 2012. The
QCA’s draft report was released on 27 November 2012 and the final report is due to the Minister
on 22 March 2013.
Structure of determination
This determination is structured as follows:

Chapter 1 – sets out the AER’s determination on Ergon Energy’s pass through
application

Chapter 2 – sets out Ergon Energy’s pass through application

Chapter 3 – sets out the AER’s assessment approach

Chapter 4 – sets out the AER’s reason for the determination
AER determination| Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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1
Determination
The AER considers that Ergon Energy’s pass through application establishes that a pass through
event occurred. The AER is satisfied that the direct FiT payments incurred by Ergon Energy in
2011–12 were paid through the operation of the Electricity Act 1994 (Qld) and materially increase
Ergon Energy’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 pass through amount for Ergon Energy’s is $27 808 270 ($Dec 2013). This means that
in 2013-14 Ergon Energy will increase its approved revenue by $27 808 270 (an increase of two
percent from the determination). For Ergon Energy customers the increase in revenue can be
recovered from customers through higher network charges.
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2
Ergon Energy’s pass through application
On 5 November 2012, the AER received a pass through application from Ergon Energy relating to
payments for the SBS. The application seeks the AER’s approval to pass through a positive pass
through amount of $27 808 270 for 2011–12.
Ergon Energy’s application indicates it incurred $27 213 421 ($June 2012) of FiT payments in
2011-12, based upon 61 156 466kWh in metered output. Ergon Energy’s application notes that the
forecast amount of 2011–12 FiT payments included in forecast operating expenditure was $3 017
327 ($June 2012).5 Ergon Energy states:
Since the inception of the Solar Bonus Scheme there has been unprecedented consumer popularity for
solar inverter energy systems (IES) resulting in a significant increase in the number of IES
installations, and in turn, IES connections to the Ergon Energy network. As a result, costs for the feedin tariff have considerably exceeded Ergon Energy’s expectations. 6
Ergon Energy submits that the difference of $24 196 094 ($June 2012), when adjusted for
inflation and the time value of money, is the proposed FiT pass-through amount of $27 808 270.
Ergon Energy proposes that the proposed positive pass through amount be incorporated into
network charges for the 2013–14 regulatory year by way of increased charges for its customers.
In its application Ergon Energy notes that FiT payments have been separately identified in Ergon
Energy’s 2011–12 regulatory information notice (RIN). A confidential extract from Ergon Energy’s
accounting system is also attached as supporting documentation.
5
AER, Final Decision: Queensland distribution determination 2010–11 to 2014–15, May 2010. p. 183.
6
Ergon Energy Corporation Limited, 2011-12 Feed-in tariff pass through application to the Australian
Energy Regulator, 5 November 2012, (Public version), p. 4.
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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 Ergon Energy’s application on 5 November 2012 and, therefore, is applying the
rules that applied on this date.7
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:
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
7
The AER notes that version 52 of the NER applied during the period in which Ergon Energy’s application
was received.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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:
(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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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
3.2
Assessment approach
When assessing Ergon Energy’s positive pass through application, the AER must first determine
whether a ‘positive change event’ occurred. This assessment is done with reference to the NER
and the current AER determination applicable to the applicant Ergon Energy (which defines the
pass through events which Ergon Energy 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 positive change event for a DNSP is defined as:
....a pass through event that materially increases the costs of providing direct control services.
Once the AER determines that a positive change event occurred it must then determine:

the approved pass through amount; and

(the amount of that approved pass through amount that should be passed through to
Distribution Network Users in each regulatory year during the regulatory control
period.8
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:

8
considered the application and supporting information it received from Ergon Energy
NER, clause 6.6.1(d).
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12

considered information provided by Ergon Energy on 5 December 2012 in response to
an information request from the AER9

9
undertaken its own analysis to verify the information provided by Ergon Energy.
This additional information related to the methodology Ergon Energy used to reconcile the FiT payments
identified in its application to those contained in the RIN.
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4
Reasons for determination
The AER is satisfied that Ergon Energy’s pass through application establishes that a pass through
event occurred. The AER considers the direct FiT payments incurred by Ergon Energy in 2011–12
materially increase Ergon Energy’s costs in providing direct control services in the regulatory control
period, as required under clause 6.6.1(j)(2) of the NER.
4.1
Occurrence of a pass through event
Chapter 15 of the AER’s Final Decision: Queensland distribution determination 2010–11 to 2014–
15 deals with pass through arrangements. In this determination a ‘Feed–in Tariff event’ is regarded
as a nominated pass through event. A ‘Feed–in Tariff event’ is defined as:10
‘a change in the total amount of direct feed–in tariff payments paid by a Qld DNSP in respect of the
Qld feed–in tariff scheme. For the purposes of this definition, the change in the amount of the direct
tariff payments paid by the DNSP must be calculated as the difference between:
a)
the amount of direct tariff payments paid by the DNSP 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
b)
the amount of scheme direct tariff payments which were forecast for the purposes of
and
included in the Qld distribution determination for each regulatory year of the regulatory control period.
Relevant direct tariff payments under this pass through mechanism are those paid through the
operation of the Electricity Act 1994 (Qld), and any amendments to this act.’
The reference to ‘the Qld feed-in tariff scheme’ in the definition above is a reference to the SBS.
10
AER, Final Decision: Queensland distribution determination decision 2010–11 to 2014–15, May 2010, p.
311.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
4.1.1
Direct feed-in tariff payments
The AER is satisfied that the direct payments incurred by Ergon Energy in 2011-12, as set out in
its pass through application, arise out of the operation of the SBS. The SBS is established under
the Electricity Act 1994 (Qld). This legislation imposes a requirement on DNSPs to allow credit for
electricity produced by small PV generators. 11
4.1.2
Materiality
Chapter 10 of the NER defines a positive change event for a distribution network service provider
as:
..a pass through event that materially increases the costs of providing direct control services.
In the AER’s Final Decision: Queensland distribution determination 2010–11 to 2014–15, 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.
However, in its draft determination the AER stated that a lower materiality threshold may be
appropriate for specific nominated pass through events, such as the feed-in tariff pass through
event, equivalent to the reasonable costs of assessing the pass through application. 12 This position
was not varied in the final determination.
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. The positive
pass through amount of $27 808 270 proposed by Ergon Energy clearly meets the administration
cost threshold for specific nominated pass through events. The AER notes that this amount is also
considerably greater than the one per cent materiality threshold applying to general nominated pass
11
s. 44A of the Electricity Act 1994 (Qld).
12
AER’s Draft Queensland distribution determination decision 2010–11 to 2014–15, November 2009, pp.
337, 339-40.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
through events. As set out in table 4.1 below the proposed pass through amount equates to
approximately two per cent of Ergon Energy’s annual revenue requirement for 2011-12 as
determined by the AER and amended by the Australian Competition Tribunal (ACT).13
Table 4.1: FiT pass through amounts as a proportion of Ergon Energy’s annual revenue
requirement for 2011-12
Ergon Energy’s proposed
Annual revenue
Proposed pass through
FiT pass through amount
requirement for 2011–12
amount as % of Ergon
(as amended by the ACT)
Energy’s annual revenue
requirement
Ergon Energy
$27 808 270
$1 269.2 million
2.2%
Source: AER analysis
The AER considers the direct FiT payments incurred by Ergon Energy under the SBS increase the
costs of providing direct control services. This is because the activities which Ergon Energy
undertakes in order to comply with its obligations under the SBS relate to direct control services as
defined in s. 2B of the National Electricity Law (NEL). For example, Ergon Energy undertakes
network operation, monitoring and metering activities as part of the SBS,
4.1.3
Timing of Ergon Energy’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 the positive change event occurring, or alternatively within 90 business days
of becoming aware of the occurrence of a negative change event.
The AER considers that the feed-in tariff event occurred at the end of the 2011–12 regulatory year
i.e. 30 June 2012. This is the date when accounting journals are closed off, and an over or under
recovery for the direct feed in payment was realised. Accordingly, the AER is satisfied that Ergon
13
See orders made by the Australian Competition Tribunal on 19 May 2011 to vary the Final Decision –
Queensland Distribution Determination 2010-11 to 2014-15 as it relates to Ergon Energy, p. 12.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
Energy submitted its pass through application within 90 business days of the positive change event
occurring.
4.2
Assessment of the pass through amount
In considering Ergon Energy’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 Ergon Energy
The AER reviewed Ergon Energy’s application and supporting information. The AER made its
determination based on the matters and proposals set out by Ergon Energy.
If the AER does not make its determination within 60 business days of receiving Ergon Energy’s
pass through application - i.e. by no later than 1 February 2013 – the AER is taken to have
determined that the pass through amount sought by the applicant is approved.14
4.2.2
The increase in costs incurred by Ergon Energy
The AER substantiated the actual SBS payment values used to calculate the positive pass through
amount sought by Ergon Energy by checking the proposed pass through amount against the FiT
payments reported in Ergon Energy’s 2011–12 RIN.
4.2.3
Actions to reduce the magnitude of the pass through amount
The SBS is a Queensland Government initiative. It is facilitated through provisions contained in the
Electricity Act 1994 (Qld) including a section which imposes a requirement on DNSPs to allow
credit for electricity produced by small PV generators. 15 The AER considers that the legislative
14
NER, clause 6.6.1 (e)
15
s. 44A of the Electricity Act 1994 (Qld)
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
obligations imposed upon Ergon Energy mean it is unable to reduce the magnitude of the pass
through amount. On this basis, the AER considers that Ergon Energy has no ability to influence the
feed-in tariff event from occurring or reducing the magnitude of the pass through amount.
4.2.4
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.
Time cost of money has been based upon the WACC for Ergon Energy, as set out in the AER’s
Final Decision: Queensland distribution determination 2010–11 to 2014–15. This is a nominal
vanilla WACC of 9.72%.16 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).
4.2.5
Recovery of costs solely a consequence of the pass through event
The AER considers that Ergon Energy’s proposed pass through amount only includes incremental
costs that are solely attributed to the direct FiT payments it has incurred. Ergon Energy’s direct FiT
payments have been verified through its RIN for 2011–12.
4.2.6
Whether the costs have already been factored into Ergon Energy’s annual
revenue requirement
In the AER’s Final Decision: Queensland distribution determination 2010–11 to 2014–15 the AER
determined that Ergon Energy’s forecast SBS operating expenditure for 2011-12 was $2.9 million
($2009–10).17
16
AER, Final Decision: Queensland distribution determination 2010–11 to 2014–15, May 2010, p. 267.
17
AER, Final Decision: Queensland distribution determination 2010–11 to 2014–15, May 2010, p. 183.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
Ergon Energy’s application identified the difference between the actual direct FiT payments it
incurred in 2011-12 and those forecast in the final determination, as reflecting the consumer
popularity of the SBS which has resulted in costs for the FiT considerably exceeding Ergon
Energy’s expectations.
The AER agrees that the difference between the forecast and actual direct FiT payments was not
provided for in the AER’s Final Decision: Queensland distribution determination 2010–11 to 2014–
15. The AER in its Draft Queensland distribution determination 2010–11 to 2014–15 considered it
appropriate for Queensland DNSPs to recover or return to users any difference between forecast
and actual direct tariff payments through a nominated pass through event. This was on the basis
that the Queensland DNSPs may have insufficient historical data to reliably forecast the payments
that they will be required to make under the SBS, thereby making the cost impact difficult to
forecast.18
4.2.7
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 Ergon Energy’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 Ergon Energy made a pass through application associated with the occurrence of a
feed-in tariff event in October 2011. This application was for a positive pass through amount in
2010–2011 regulatory year. In December 2011, the AER approved a positive pass through amount
of $4 754 512 to be incorporated into distribution charges for 2012–13.
18
AER’s Draft Queensland distribution determination decision 2010–11 to 2014–15, November 2009, p.
340.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
4.2.8
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.
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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;
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(6) evidence:
(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
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
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
(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):
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
(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.
(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:
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
(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
(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
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
(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
(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:
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
(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
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.
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).
positive change event
(a) For a Transmission Network Service Provider, a pass through event that materially
increases the costs of providing prescribed transmission services, but does not include a
contingent project or an associated trigger event.
(b) For a Distribution Network Service Provider, a pass through event that materially increases
the costs of providing direct control services.
(c) For a Distribution Network Service Provider, a retailer insolvency event.
positive pass through amount
For a Transmission Network Service Provider, an amount (not exceeding the eligible pass
through amount) proposed by the provider under clause 6A.7.3(c).
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12
For a, an amount (not exceeding the eligible pass through amount) proposed by the provider
under clause 6.6.1(c).
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AER determination | Ergon Energy pass through application for Queensland solar bonus scheme 2011-12