Value of imputation credits: Detailed analysis In attachment 4, we set out our position on the value of imputation credits—which is to adopt a value of 0.4—and our key reasons for that position. We also indicated the position submitted to us by TasNetworks. In this appendix, we set out further supporting material for our position on the value of imputation credits. Despite proposing a value of imputation credits of 0.5, TasNetworks considered that a report by SFG provided 'significant evidence' to suggest that the value should be 0.25. This report was jointly commissioned by TasNetworks and a number of other service providers with current regulatory decisions. These other service providers relied extensively on this report in their proposals, and adopted the report's recommendation of a value of imputation credits of 0.25. Although TasNetworks did not propose a value of 0.25, our analysis in this appendix is applicable and consistent with our analysis of the proposals from those other service providers. Expert views on the value of imputation credits We, other regulators, service providers and consumer representatives have commissioned expert advice on the value of imputation credits from a range of experts in the context of a number of regulatory processes. These expert reports demonstrate that there is no consensus among experts on either the value of imputation credits (particularly for the utilisation rate parameter), nor on the techniques to estimate it. Table A.1 summarises recent expert advice of which we are aware. We have considered the advice from each of these experts in forming our position on the value of imputation credits. Table . Summary of expert views on the value of imputation credits Expert Distribution rate Utilisation rate Value of imputation credits 1.0, based on assumption that all investors in the Officer CAPM are 0.84 0.84 using the financial domestic investors Lally (2013, 2014) statements of 20 largest 0.45 to 0.59 using second companies 0.54 to 0.7, using equity preference utilisation rate ownership as second preference None recommended, although McKenzie and 0.7, using cumulative payout ratio Evidence not compelling enough to estimates considered included 0.7 Partington (2013) approach over all equity depart from 0.5 from AER draft rate of return guideline approach, 0.53 from
Value of imputation credits: Detailed analysis In attachment 4, we set out our position on the value of imputation credits—which is to adopt a value of 0.4—and our key reasons for that position. We also indicated the position submitted to us by TasNetworks. In this appendix, we set out further supporting material for our position on the value of imputation credits. Despite proposing a value of imputation credits of 0.5, TasNetworks considered that a report by SFG provided 'significant evidence' to suggest that the value should be 0.25. This report was jointly commissioned by TasNetworks and a number of other service providers with current regulatory decisions. These other service providers relied extensively on this report in their proposals, and adopted the report's recommendation of a value of imputation credits of 0.25. Although TasNetworks did not propose a value of 0.25, our analysis in this appendix is applicable and consistent with our analysis of the proposals from those other service providers. Expert views on the value of imputation credits We, other regulators, service providers and consumer representatives have commissioned expert advice on the value of imputation credits from a range of experts in the context of a number of regulatory processes. These expert reports demonstrate that there is no consensus among experts on either the value of imputation credits (particularly for the utilisation rate parameter), nor on the techniques to estimate it. Table A.1 summarises recent expert advice of which we are aware. We have considered the advice from each of these experts in forming our position on the value of imputation credits. Table . Summary of expert views on the value of imputation credits Expert Distribution rate Utilisation rate Value of imputation credits Lally (2013, 2014) 0.84 using the financial statements of 20 largest companies 1.0, based on assumption that all investors in the Officer CAPM are domestic investors 0.54 to 0.7, using equity ownership as second preference 0.84 0.45 to 0.59 using second preference utilisation rate McKenzie and Partington (2013) 0.7, using cumulative payout ratio approach over all equity None recommended, although estimates considered included 0.7 from AER draft rate of return guideline approach, 0.53 from Evidence not compelling enough to depart from 0.5