We consider energy delivered satisfies the criteria that the output reflects services to customers. However, peak demand or system capacity has more influence on the expenditure objectives than energy delivered. Consequently, energy delivered may also not significantly affect a DNSP’s costs, relative to peak demand and system capacity. To limit the number of variables in our preferred output specification (which will also alleviate our degrees of freedom concerns), we consider the preferred model specifications should include only the most significant variables. Energy delivered does not satisfy this requirement. It could be included in sensitivity analysis (given its common use in other economic benchmarking studies). Revenue We consider revenue data may be limited in providing output weights. Similarly, stakeholders did not consider a billed outputs specification to be appropriate. They also argued there was no link between revenue and functional outputs. However, it could still be used in sensitivity analysis and to examine the link between revenue and billed outputs (such as customers and throughput).This is because customers are included in our preferred model specification for DNSPs and energy delivered is included in our alternative model specifications for both DNSPs and TNSPs. We consider revenue data are not an onerous data requirement. We already receive aggregated annual revenue and disaggregating revenue into customer types and chargeable quantity is consistent with the disaggregation required for customer and energy delivered data. System security, electricity quality and safety We consider network security, electricity quality and safety should not be included in our economic benchmarking analysis until a robust measure is available for these variables. Some stakeholders, such as CitiPower, Powercor and SA Power Networks, considered quality of supply should be included in economic benchmarking but noted the data limitations. They also noted quality of supply is expected to increase in Victoria with the introduction of advanced metering infrastructure meters. We consider reliability, not system security, better reflects the quality of services provided to customers. System security is also difficult to quantify for economic benchmarking. We agree with Economic Insight’s consideration that electricity quality and safety are important, but that they should not be included as an output variable. Safety and quality standards are a basic requirement of DNSP operation and are unlikely to be substantially different across DNSPs. There is also no single overall summary measure for quality and safety.
We consider energy delivered satisfies the criteria that the output reflects services to customers. However, peak demand or system capacity has more influence on the expenditure objectives than energy delivered. Consequently, energy delivered may also not significantly affect a DNSP’s costs, relative to peak demand and system capacity. To limit the number of variables in our preferred output specification (which will also alleviate our degrees of freedom concerns), we consider the preferred model specifications should include only the most significant variables. Energy delivered does not satisfy this requirement. It could be included in sensitivity analysis (given its common use in other economic benchmarking studies). Revenue We consider revenue data may be limited in providing output weights. Similarly, stakeholders did not consider a billed outputs specification to be appropriate. They also argued there was no link between revenue and functional outputs. However, it could still be used in sensitivity analysis and to examine the link between revenue and billed outputs (such as customers and throughput).This is because customers are included in our preferred model specification for DNSPs and energy delivered is included in our alternative model specifications for both DNSPs and TNSPs. We consider revenue data are not an onerous data requirement. We already receive aggregated annual revenue and disaggregating revenue into customer types and chargeable quantity is consistent with the disaggregation required for customer and energy delivered data. System security, electricity quality and safety We consider network security, electricity quality and safety should not be included in our economic benchmarking analysis until a robust measure is available for these variables. Some stakeholders, such as CitiPower, Powercor and SA Power Networks, considered quality of supply should be included in economic benchmarking but noted the data limitations. They also noted quality of supply is expected to increase in Victoria with the introduction of advanced metering infrastructure meters. We consider reliability, not system security, better reflects the quality of services provided to customers. System security is also difficult to quantify for economic benchmarking. We agree with Economic Insight’s consideration that electricity quality and safety are important, but that they should not be included as an output variable. Safety and quality standards are a basic requirement of DNSP operation and are unlikely to be substantially different across DNSPs. There is also no single overall summary measure for quality and safety.
AER%20Explanatory%20statement%20-%20draft%20expenditure%20forecast%20assessment%20guideline%20-%20August%202013.DOCX