Constituent components and interrelationships The NEL requires us to specify how the constituent components of our draft decision relate to each other and how we have taken those interrelationships into account in making our decision. When considering any constituent component of a decision as complex as a transmission determination, it is important to also consider the interrelationships between constituent components. Ultimately, a transmission determination is an overall decision and must be considered as such. Considering constituent components in isolation ignores the importance of these interrelationships, would not contribute to the achievement of the NEO and, in the past, has resulted in regulatory failures. Interrelationships can take various forms including: underlying drivers and context are likely to affect many constituent components of our decision. For example, forecast demand affects the efficient levels of capex and opex in the regulatory control period and it also affects how overall revenue is translated into individual prices. direct mathematical links between different components of a decision. For example, the value of imputation credits has an impact on the appropriate tax allowance; the benchmark efficient entity's debt to equity ratio has a direct effect on the cost of equity, the cost of debt and the overall vanilla rate of return. trade-offs between different components of revenue. For example, undertaking a particular capex project may affect the need for opex and vice versa. trade-offs between forecast and actual regulatory measures. The reasons for one part of a proposal may have impacts on other parts of a proposal. For example, an increase in augmentation to the network means the TNSP has more assets to maintain leading to higher opex requirements. the TNSP's approach and attitude to managing its network. The TNSP's governance arrangements and its approach to risk management will influence most aspects of the proposal, including the capex/opex trade-off. Interrelationships are also a useful tool when approaching decision making more holistically. This is especially the case for underlying drivers that are likely to affect many aspects of revenue simultaneously. In these cases, individual drivers may substantially influence the overall efficient revenue allowance. As a result, while there is no tool to directly estimate an efficient overall revenue allowance, underlying drivers can indicate the direction and broad magnitude of changes to the efficient level of overall revenue.
Constituent components and interrelationships The NEL requires us to specify how the constituent components of our draft decision relate to each other and how we have taken those interrelationships into account in making our decision. When considering any constituent component of a decision as complex as a transmission determination, it is important to also consider the interrelationships between constituent components. Ultimately, a transmission determination is an overall decision and must be considered as such. Considering constituent components in isolation ignores the importance of these interrelationships, would not contribute to the achievement of the NEO and, in the past, has resulted in regulatory failures. Interrelationships can take various forms including: underlying drivers and context are likely to affect many constituent components of our decision. For example, forecast demand affects the efficient levels of capex and opex in the regulatory control period and it also affects how overall revenue is translated into individual prices. direct mathematical links between different components of a decision. For example, the value of imputation credits has an impact on the appropriate tax allowance; the benchmark efficient entity's debt to equity ratio has a direct effect on the cost of equity, the cost of debt and the overall vanilla rate of return. trade-offs between different components of revenue. For example, undertaking a particular capex project may affect the need for opex and vice versa. trade-offs between forecast and actual regulatory measures. The reasons for one part of a proposal may have impacts on other parts of a proposal. For example, an increase in augmentation to the network means the TNSP has more assets to maintain leading to higher opex requirements. the TNSP's approach and attitude to managing its network. The TNSP's governance arrangements and its approach to risk management will influence most aspects of the proposal, including the capex/opex trade-off. Interrelationships are also a useful tool when approaching decision making more holistically. This is especially the case for underlying drivers that are likely to affect many aspects of revenue simultaneously. In these cases, individual drivers may substantially influence the overall efficient revenue allowance. As a result, while there is no tool to directly estimate an efficient overall revenue allowance, underlying drivers can indicate the direction and broad magnitude of changes to the efficient level of overall revenue.