Energy will be able to maintain both its average reliability level and meet its minimum reliability standards within our approved capex forecast. Our approved capex forecast must also be considered in the context of the significant capex program undertaken in the previous regulatory period. We are satisfied that our alternative estimate reasonably reflects the criteria. AER findings and estimates for augmentation expenditure Essential Energy proposed a forecast of $803 million ($2013–14) for augmentation capex (augex) in its revised proposal (excluding overheads). This is an 8 per cent increase compared to the $745 million ($2013-14) augex forecast in its initial proposal. Position We do not accept Essential Energy's revised augex proposal. We have instead included an amount of $686.3 million ($2013-14) for augex in our alternative estimate of overall total capex (excluding overheads). This is 15 per cent lower than Essential Energy's revised proposal. We are satisfied that this amount, when combined with the rest of our capex decision, reasonably reflects the capex criteria. Table B1 compares forecasts across the decision making process between the initial proposal and our final decision. Table Essential Energy augex forecasts comparisons ($2013–14, million) 2014-15 2015-16 2016-17 2017-18 2018-19 Total Initial augex 169.1 154.8 143.7 140.3 136.7 744.6 forecast AER draft 113.9 100.2 89.9 87.0 84.1 475.2 decision Revised 155.0 178.9 165.7 159.3 148.6 807.4 Proposal AER final 133.4 155.5 141.1 133.7 122.6 686.3 forecast Source: AER Analysis Our decision forecast amount reflects the following: We reduced Essential Energy's forecast capex for its high voltage (HV) network feeders by $43.8 million ($2013-14), or 15 per cent, based on forecast declines in network growth. We accept Essential Energy's revised proposal that localised or spatial demand growth rather than whole-of-system demand growth is the appropriate driver of Essential's HV feeders capex. However, we do not consider that Essential Energy's approach to forecasting its HV feeder capex adequately
Energy will be able to maintain both its average reliability level and meet its minimum reliability standards within our approved capex forecast. Our approved capex forecast must also be considered in the context of the significant capex program undertaken in the previous regulatory period. We are satisfied that our alternative estimate reasonably reflects the criteria. AER findings and estimates for augmentation expenditure Essential Energy proposed a forecast of $803 million ($2013–14) for augmentation capex (augex) in its revised proposal (excluding overheads). This is an 8 per cent increase compared to the $745 million ($2013-14) augex forecast in its initial proposal. Position We do not accept Essential Energy's revised augex proposal. We have instead included an amount of $686.3 million ($2013-14) for augex in our alternative estimate of overall total capex (excluding overheads). This is 15 per cent lower than Essential Energy's revised proposal. We are satisfied that this amount, when combined with the rest of our capex decision, reasonably reflects the capex criteria. Table B1 compares forecasts across the decision making process between the initial proposal and our final decision. Table Essential Energy augex forecasts comparisons ($2013–14, million) 2014-15 2015-16 2016-17 2017-18 2018-19 Total Initial augex forecast 169.1 154.8 143.7 140.3 136.7 744.6 AER draft decision 113.9 100.2 89.9 87.0 84.1 475.2 Revised Proposal 155.0 178.9 165.7 159.3 148.6 807.4 AER final forecast 133.4 155.5 141.1 133.7 122.6 686.3 Source: AER Analysis Our decision forecast amount reflects the following: We reduced Essential Energy's forecast capex for its high voltage (HV) network feeders by $43.8 million ($2013-14), or 15 per cent, based on forecast declines in network growth. We accept Essential Energy's revised proposal that localised or spatial demand growth rather than whole-of-system demand growth is the appropriate driver of Essential's HV feeders capex. However, we do not consider that Essential Energy's approach to forecasting its HV feeder capex adequately
AER%20-%20Final%20Decision%20Essential%20Energy%20distribution%20determination%20-%20Attachment%206%20-%20Capital%20expenditure%20-%20April%202015.DOCX