Where practicable, transaction costs in the provision of the services were reduced in 2014/15 by grouping similar services and eliminating some services for which there was little demand in 2013/14; and The labour rates used in estimating the 2015/16 prices for alternative control services do not include corporate overheads. Efficient Network Pricing In ensuring the reference tariffs for direct control services are established in accordance with recognised economic principles, Power Networks has taken into consideration the factors set out in Table 5. 5 Power Networks’ consideration of efficient pricing – Efficient costs Power Networks’ consideration RIN clause 16.4; and TPA Code clause 74(1)(a) taken into account Power Networks has calculated the LRMC using the Average the long run Incremental Cost for the high and low voltages of its network, marginal cost for the based on demand related capital expenditure, an allowance service or, in the for operating and maintenance expenditure, and demand case of a charging growth. This calculation is contained in Power Networks’ Cost parameter, for the of Supply Model described in Attachment A2.6. element of the Section 13.3.1 of Power Networks’ 2015/16 Network Pricing service to which the Proposal (Part B) describes the way in which Power Networks charging parameter has taken into account the LRMC in setting the charging relates parameters of individual tariffs. had regard to: Power Networks is simplifying the tariffs of larger (annual consumption greater than 750 MWh) commercial customers, (i) transaction by progressively reducing the number of energy and demand costs associated blocks for kVA and kWh customers down to three in 2015/16 with the tariff or from five in the previous year. each charging parameter; and This matter is addressed in more detail in section 13.4. (ii) whether The price signals embodied in Power Networks’ tariffs are customers of subject to many considerations. They have been aligned to the relevant the maximum extent practical with the LRMC for the network, tariff class are with the express intention of minimising distortionary pricing able or likely to arrangements. In this way, the probability of customers respond to price responding in a way that will mitigate demand growth is signals. maximised. This matter is addressed in more detail in section 13.5. Modelling As per clause 16.5 of the RIN, Power Networks has provided its Cost of Supply Model (2015/16 Pricing Proposal Model) to the Commission as Confidential Attachment 6 to
Where practicable, transaction costs in the provision of the services were reduced in 2014/15 by grouping similar services and eliminating some services for which there was little demand in 2013/14; and The labour rates used in estimating the 2015/16 prices for alternative control services do not include corporate overheads. Efficient Network Pricing In ensuring the reference tariffs for direct control services are established in accordance with recognised economic principles, Power Networks has taken into consideration the factors set out in Table 5. 5 – Power Networks’ consideration of efficient pricing Efficient costs RIN clause 16.4; and TPA Code clause 74(1)(a) Power Networks’ consideration taken into account the long run marginal cost for the service or, in the case of a charging parameter, for the element of the service to which the charging parameter relates Power Networks has calculated the LRMC using the Average Incremental Cost for the high and low voltages of its network, based on demand related capital expenditure, an allowance for operating and maintenance expenditure, and demand growth. This calculation is contained in Power Networks’ Cost of Supply Model described in Attachment A2.6. Section 13.3.1 of Power Networks’ 2015/16 Network Pricing Proposal (Part B) describes the way in which Power Networks has taken into account the LRMC in setting the charging parameters of individual tariffs. had regard to: (i) transaction costs associated with the tariff or each charging parameter; and (ii) whether customers of the relevant tariff class are able or likely to respond to price signals. Power Networks is simplifying the tariffs of larger (annual consumption greater than 750 MWh) commercial customers, by progressively reducing the number of energy and demand blocks for kVA and kWh customers down to three in 2015/16 from five in the previous year. This matter is addressed in more detail in section 13.4. The price signals embodied in Power Networks’ tariffs are subject to many considerations. They have been aligned to the maximum extent practical with the LRMC for the network, with the express intention of minimising distortionary pricing arrangements. In this way, the probability of customers responding in a way that will mitigate demand growth is maximised. This matter is addressed in more detail in section 13.5. Modelling As per clause 16.5 of the RIN, Power Networks has provided its Cost of Supply Model (2015/16 Pricing Proposal Model) to the Commission as Confidential Attachment 6 to
UC-PWC-NPPS-1516.docx