approach and tax statistics. Lally prefers a conceptual approach, but his second preference is the equity ownership approach. As a result of the differing approaches, particularly to the utilisation rate, the range of estimates of the value of imputation credits is 0.25 to 0.84. Conceptually, the value of imputation credits must be between 0 and 1. Accordingly the range of recommended estimates from 0.25 to 0.84, which spans most of the possible range for the value of imputation credits, highlights the lack of consensus among experts. Our preliminary decision value of imputation credits of 0.4 sits in the lower half of the range recommended by experts, which is more favourable to service providers. The value of imputation credits used by other regulators Australian regulators have applied a wide range of approaches to estimate the value of imputation credits, resulting in varied outcomes. Table 44 summarises some recent regulatory decisions on the value of imputation credits. While these decisions have not directly informed our position on the value of imputation credits, they indicate that there is no conceptual or practical consensus amongst Australian regulators. Table Australian regulators' approaches to the value of imputation credits Value of imputation Regulator Form of adoption Year Distribution rate Utilisation rate credits 0.35, using 2011 Review of imputation 0.7, using cumulative IPART 2012 version of SFG 0.25 credits, final decision payout ratio approach dividend drop off study review, greater metropolitan water 0.5, on 2011 ESC 2013 N/A N/A businesses, final guidance decision 0.84, using the 0.56, based primarily Cost of capital market financial statements on the domestic QCA parameters, final 2014 0.47 of 20 largest ownership share of decision companies listed equity 0.7, most weight to simple domestic ownership share of all Review of rate of equity, some weight to return estimation for 0.7, cumulative ERA 2014 conceptual goalposts 0.5 rail networks, revised payout ratio approach approach, low weight to draft determination tax statistics and dividend drop off studies 0.45, set for consistency with Fixed line services previous ACCC (telecommunications), decisions, but with ACCC 2015 N/A N/A draft decision on regard to a range of access determination recent evidence, including firm specific factors
approach and tax statistics. Lally prefers a conceptual approach, but his second preference is the equity ownership approach. As a result of the differing approaches, particularly to the utilisation rate, the range of estimates of the value of imputation credits is 0.25 to 0.84. Conceptually, the value of imputation credits must be between 0 and 1. Accordingly the range of recommended estimates from 0.25 to 0.84, which spans most of the possible range for the value of imputation credits, highlights the lack of consensus among experts. Our preliminary decision value of imputation credits of 0.4 sits in the lower half of the range recommended by experts, which is more favourable to service providers. The value of imputation credits used by other regulators Australian regulators have applied a wide range of approaches to estimate the value of imputation credits, resulting in varied outcomes. Table 44 summarises some recent regulatory decisions on the value of imputation credits. While these decisions have not directly informed our position on the value of imputation credits, they indicate that there is no conceptual or practical consensus amongst Australian regulators. Table Australian regulators' approaches to the value of imputation credits Regulator Form of adoption Year Distribution rate Utilisation rate Value of imputation credits IPART Review of imputation credits, final decision 2012 0.7, using cumulative payout ratio approach 0.35, using 2011 version of SFG dividend drop off study 0.25 ESC review, greater metropolitan water businesses, final decision 2013 N/A N/A 0.5, on 2011 guidance QCA Cost of capital market parameters, final decision 2014 0.84, using the financial statements of 20 largest companies 0.56, based primarily on the domestic ownership share of listed equity 0.47 ERA Review of rate of return estimation for rail networks, revised draft determination 2014 0.7, cumulative payout ratio approach 0.7, most weight to simple domestic ownership share of all equity, some weight to conceptual goalposts approach, low weight to tax statistics and dividend drop off studies 0.5 ACCC Fixed line services (telecommunications), draft decision on access determination 2015 N/A N/A 0.45, set for consistency with previous ACCC decisions, but with regard to a range of recent evidence, including firm specific factors
AER%20-%20Preliminary%20decision%20Powercor%20distribution%20determination%20-%20Attachment%204%20-%20Value%20of%20imputation%20credits%20-%20October%202015_0.DOCX