ARS 11.7 11.7 –0.0 Total 364.8 293.9 –70.8 Source: AER analysis Envestra Albury proposed and AER’s draft decision on opex ($million, 2011) Envestra proposal AER draft decision Difference Base year costs 9.1 11.8 2.7 Errors –0.0 0.0 Labour cost escalation 0.5 0.2 –0.3 Materials cost escalation 0.6 – –0.6 Network growth 0.1 0.1 0.0 Step changes 0.8 0.2 –0.6 NMF 0.5 0.4 –0.1 Incentive fee – – – ARS 0.7 0.7 – Total 12.3 13.5 1.1 Source: AER analysis As can be seen from table 9.3 and table 9.4, the main differences between Envestra’s proposed opex and the AER’s draft decision on opex relate to step changes and differences in the labour cost escalation. These and other differences are discussed below. Base year costs Envestra proposed 2011 as the base year, proposing base year expenditure as 2011 actual expenditure less certain costs. The base year costs are determined by taking actual opex from the fourth year of the 2008–12 access arrangement period, indexing these figures and making any required adjustments. The AER's base year estimate for opex is set on the basis of actual 2011 costs incurred by Envestra. In forming this estimate, the AER made adjustments to the costs incurred by Envestra in 2011 to remove movement in provisions and licence fees.
ARS 11.7 11.7 –0.0 Total 364.8 293.9 –70.8 Source: AER analysis Envestra Albury proposed and AER’s draft decision on opex ($million, 2011) Envestra proposal AER draft decision Difference Base year costs 9.1 11.8 2.7 Errors –0.0 0.0 Labour cost escalation 0.5 0.2 –0.3 Materials cost escalation 0.6 – –0.6 Network growth 0.1 0.1 0.0 Step changes 0.8 0.2 –0.6 NMF 0.5 0.4 –0.1 Incentive fee – – – ARS 0.7 0.7 – Total 12.3 13.5 1.1 Source: AER analysis As can be seen from table 9.3 and table 9.4, the main differences between Envestra’s proposed opex and the AER’s draft decision on opex relate to step changes and differences in the labour cost escalation. These and other differences are discussed below. Base year costs Envestra proposed 2011 as the base year, proposing base year expenditure as 2011 actual expenditure less certain costs. The base year costs are determined by taking actual opex from the fourth year of the 2008–12 access arrangement period, indexing these figures and making any required adjustments. The AER's base year estimate for opex is set on the basis of actual 2011 costs incurred by Envestra. In forming this estimate, the AER made adjustments to the costs incurred by Envestra in 2011 to remove movement in provisions and licence fees.
Envestra%20draft%20decision%20-%20Part%201.docx