are better suited to certain situations than other techniques. In relation to expenditure in the distant future we recognise that estimation techniques can be subject to significant uncertainty, which makes their application difficult. This is typically the situation we must address in making revenue determinations that stretch out into the future. Consequently, we accept that there is a need to balance the competing needs for accuracy and detail with cost and uncertainty. There is flexibility built into our guideline to accommodate these considerations. We continue to expect that the major technique used in forecasting capex will be the "bottom–up build". AER staff have communicated this view to Powerlink in our preliminary discussions. We note that Powerlink acknowledges this will be the case in their submission to this F&A process. We note that Powerlink has stated it intends limiting its use of the technique to certain specific categories of expenditure. We are continuing to discuss this subject with Powerlink and have yet to reach a final position in those discussions. With regard to the CCP submission, we agree with the CCP that potential could exist for the inappropriate application of the "top–down" approach to limit the quality of information available to the AER. We agree that would be unacceptable. We also note their concern that we may compromise our ability to robustly assess a proposal if we endorse an inappropriate cost estimation methodology. The AER will not compromise its ability to assess any proposal. We do not endorse expenditure forecasting methodologies. We reserve the right to apply the technique or combination of techniques we consider best suits the discharge of our duties. It will remain the task of the TNSP to justify its proposal to the AER. If we judge that information is inaccurate, incomplete or insufficient to assess a proposed expenditure we will use the regulatory tools at our disposal to address that deficiency. Therefore, we believe that our current approach to expenditure forecasting is sound. Powerlink may make use of "top–down" forecasting but if we consider it is inappropriate to a particular expenditure Powerlink will be at risk of that proposal being rejected or substantially amended. Based on Powerlink's public discussion of this topic with us, we believe Powerlink understand this risk. Through these discussions we believe Powerlink are seeking to ensure their future regulatory proposal is appropriately justified with a commensurate degree of effort. The AER will to apply the expenditure forecasting assessment guideline in the 2017–22 regulatory control period.
are better suited to certain situations than other techniques. In relation to expenditure in the distant future we recognise that estimation techniques can be subject to significant uncertainty, which makes their application difficult. This is typically the situation we must address in making revenue determinations that stretch out into the future. Consequently, we accept that there is a need to balance the competing needs for accuracy and detail with cost and uncertainty. There is flexibility built into our guideline to accommodate these considerations. We continue to expect that the major technique used in forecasting capex will be the "bottom–up build". AER staff have communicated this view to Powerlink in our preliminary discussions. We note that Powerlink acknowledges this will be the case in their submission to this F&A process. We note that Powerlink has stated it intends limiting its use of the technique to certain specific categories of expenditure. We are continuing to discuss this subject with Powerlink and have yet to reach a final position in those discussions. With regard to the CCP submission, we agree with the CCP that potential could exist for the inappropriate application of the "top–down" approach to limit the quality of information available to the AER. We agree that would be unacceptable. We also note their concern that we may compromise our ability to robustly assess a proposal if we endorse an inappropriate cost estimation methodology. The AER will not compromise its ability to assess any proposal. We do not endorse expenditure forecasting methodologies. We reserve the right to apply the technique or combination of techniques we consider best suits the discharge of our duties. It will remain the task of the TNSP to justify its proposal to the AER. If we judge that information is inaccurate, incomplete or insufficient to assess a proposed expenditure we will use the regulatory tools at our disposal to address that deficiency. Therefore, we believe that our current approach to expenditure forecasting is sound. Powerlink may make use of "top–down" forecasting but if we consider it is inappropriate to a particular expenditure Powerlink will be at risk of that proposal being rejected or substantially amended. Based on Powerlink's public discussion of this topic with us, we believe Powerlink understand this risk. Through these discussions we believe Powerlink are seeking to ensure their future regulatory proposal is appropriately justified with a commensurate degree of effort. The AER will to apply the expenditure forecasting assessment guideline in the 2017–22 regulatory control period.
Final%20Framework%20and%20Approach%20for%20Powerlink%20for%202017-2022.DOCX