prejudicial act towards them, and it obviates the need to collect contentious historical DRP data. APPENDIX 1: Terms of Reference Part one The AER considered the efficient financing practices of a benchmark efficient entity would be to minimise its financing costs over the life of its assets while managing refinancing risk and interest rate risk. The AER seeks a critical review of this view on efficient financing practices. The AER seeks a critical review of the efficient debt financing practices the AER considered a benchmark efficient entity would undertake under the following regulatory approaches: The on-the-day approach The trailing average approach; and A transition between the on-the-day approach and the trailing average approach (based on the transition path the AER proposed in the rate of return guideline). The averaging periods for these regulatory approaches are set out in table 2 of attachment 1. Question (2) should be answered from the perspective of a benchmark efficient entity. The AER defines a benchmark efficient entity as a pure play, regulated energy network business operating within Australia. Advise on whether the on the efficient financing practices under the consultant’s advice three listed regulatory approaches in question (2) differs for a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers. The consultant’s advice should engage with the following matters, in particular, and any other matters the consultant considers relevant: The debt portfolio size of a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers (see table 1 in attachment 2) The cost and availability of hedging instruments to a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers
prejudicial act towards them, and it obviates the need to collect contentious historical DRP data. APPENDIX 1: Terms of Reference Part one The AER considered the efficient financing practices of a benchmark efficient entity would be to minimise its financing costs over the life of its assets while managing refinancing risk and interest rate risk. The AER seeks a critical review of this view on efficient financing practices. The AER seeks a critical review of the efficient debt financing practices the AER considered a benchmark efficient entity would undertake under the following regulatory approaches: The on-the-day approach The trailing average approach; and A transition between the on-the-day approach and the trailing average approach (based on the transition path the AER proposed in the rate of return guideline). The averaging periods for these regulatory approaches are set out in table 2 of attachment 1. Question (2) should be answered from the perspective of a benchmark efficient entity. The AER defines a benchmark efficient entity as a pure play, regulated energy network business operating within Australia. Advise on whether the consultant’s advice on the efficient financing practices under the three listed regulatory approaches in question (2) differs for a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers. The consultant’s advice should engage with the following matters, in particular, and any other matters the consultant considers relevant: The debt portfolio size of a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers (see table 1 in attachment 2) The cost and availability of hedging instruments to a benchmark efficient entity with a similar degree of risk as each of the NSW/ACT service providers