Licence conditions We are satisfied that it is not necessary to provide an operating environment adjustment for differences in licence conditions across jurisdictions. It raises operating environment adjustment criteria two and three. Licence conditions are not likely to materially affect opex because reliability standards are similar for the NSW service providers and most of the comparison service providers over the 2014–19 period. Also, Economic Insights' benchmarking models take reliability requirements into account in two ways: reliability is an output and so are some measures of physical assets. All of the NSW service providers identified license conditions as a major part in explaining cost differentials between jurisdictions. We are satisfied that an adjustment for licence conditions would not be appropriate. While the NSW service providers were subjected to mandated design planning conditions during the benchmarking period, the impact of these conditions was predominantly capital in nature. To this end, having invested more capex over the benchmarking period, the NSW service providers will benefit from younger assets and higher reliability. In addition, since recent AEMC reviews of distribution reliability, the NSW government has relaxed the reliability standards to allow the NSW service providers to adopt probabilistic planning. This removes the primary difference between NSW service providers and the comparison service providers, with regard to licence conditions, in the forecast period. We are satisfied that an adjustment for licence conditions would not meet operating environment adjustment criterion three because Economic Insights' benchmarking models account for reliability and physical assets. Reliability is an output in the MTFP and MPFP models. Also all of the benchmarking models include output measures that are correlated with service providers' capital stocks such as circuit length. Planning regulations We are satisfied that it is not necessary to provide an operating environment adjustment for differences in planning regulations across jurisdictions. It raises operating environment adjustment criterion two. Differences in planning regulations are not likely to create material differences in opex across jurisdictions. Ausgrid's consultant Evans and Peck identified differences in planning regulations as an operating environment factor that may affect benchmarking results. They say that in Sydney costs are higher due to council requirements. Specifically, they say that requirements for laying and relaying of concrete pavements
Licence conditions We are satisfied that it is not necessary to provide an operating environment adjustment for differences in licence conditions across jurisdictions. It raises operating environment adjustment criteria two and three. Licence conditions are not likely to materially affect opex because reliability standards are similar for the NSW service providers and most of the comparison service providers over the 2014–19 period. Also, Economic Insights' benchmarking models take reliability requirements into account in two ways: reliability is an output and so are some measures of physical assets. All of the NSW service providers identified license conditions as a major part in explaining cost differentials between jurisdictions. We are satisfied that an adjustment for licence conditions would not be appropriate. While the NSW service providers were subjected to mandated design planning conditions during the benchmarking period, the impact of these conditions was predominantly capital in nature. To this end, having invested more capex over the benchmarking period, the NSW service providers will benefit from younger assets and higher reliability. In addition, since recent AEMC reviews of distribution reliability, the NSW government has relaxed the reliability standards to allow the NSW service providers to adopt probabilistic planning. This removes the primary difference between NSW service providers and the comparison service providers, with regard to licence conditions, in the forecast period. We are satisfied that an adjustment for licence conditions would not meet operating environment adjustment criterion three because Economic Insights' benchmarking models account for reliability and physical assets. Reliability is an output in the MTFP and MPFP models. Also all of the benchmarking models include output measures that are correlated with service providers' capital stocks such as circuit length. Planning regulations We are satisfied that it is not necessary to provide an operating environment adjustment for differences in planning regulations across jurisdictions. It raises operating environment adjustment criterion two. Differences in planning regulations are not likely to create material differences in opex across jurisdictions. Ausgrid's consultant Evans and Peck identified differences in planning regulations as an operating environment factor that may affect benchmarking results. They say that in Sydney costs are higher due to council requirements. Specifically, they say that requirements for laying and relaying of concrete pavements
AER%20%E2%80%93%20Draft%20decision%20Endeavour%20Energy%20distribution%20determination%20%E2%80%93%20Attachment%207%20%E2%80%93%20%20Operating%20expenditure%20%E2%80%93%20November%202014.DOCX