Ausgrid's consultant Evans and Peck said differences in the risk appetites of service providers' network owning corporations may shape the costs of service providers and therefore impede like for like comparison. Evans and Peck did not provide any further explanation about how differences in risk appetite would impede comparisons. Part of the role of a corporation's management is to select the level of risk that they are willing to bear. The quality of a firm's management is an endogenous factor that does not require an adjustment. Work and operating procedures We are satisfied that it is not necessary to provide an adjustment for work and operating procedures. Work and operating procedures are under the direct control of service providers' management. Evans and Peck raised the issue of work and operating procedures as an operating environment factor in its report for Ausgrid. Evans and Peck indicate that differences work and operating procedures may affect both operating and capital cost drivers. It is the role of service providers' management to seek and implement ways to improve the effectiveness and efficiency of the service provider's work and operating procedures. Because the effectiveness and efficiency of a service providers' work and operating procedures are a result of the quality of a service providers management, they are endogenous to the business and we do not consider it appropriate to account for them when benchmarking. Work conditions We are satisfied that it is not necessary to provide an operating environment adjustment for differences in work conditions. Service providers' managements are able to negotiate the agreements that they make with their workers. Evans and Peck raised the issue of wage rates as an operating environment factor in its report for Ausgrid. Evans and Peck indicate that differences in wage rates and stand-down provisions in awards may affect both operating and capital cost drivers. The service providers in the NEM all have enterprise agreements. A service provider's management has discretion in reaching an agreement that it strikes with its workforce. The deal that it makes represents a trade-off. The agreement might provide for lower wage rates in return for higher non-salary conditions. Alternatively, it might provide higher wage rates in exchange for productivity improvements. This is a
Ausgrid's consultant Evans and Peck said differences in the risk appetites of service providers' network owning corporations may shape the costs of service providers and therefore impede like for like comparison. Evans and Peck did not provide any further explanation about how differences in risk appetite would impede comparisons. Part of the role of a corporation's management is to select the level of risk that they are willing to bear. The quality of a firm's management is an endogenous factor that does not require an adjustment. Work and operating procedures We are satisfied that it is not necessary to provide an adjustment for work and operating procedures. Work and operating procedures are under the direct control of service providers' management. Evans and Peck raised the issue of work and operating procedures as an operating environment factor in its report for Ausgrid. Evans and Peck indicate that differences work and operating procedures may affect both operating and capital cost drivers. It is the role of service providers' management to seek and implement ways to improve the effectiveness and efficiency of the service provider's work and operating procedures. Because the effectiveness and efficiency of a service providers' work and operating procedures are a result of the quality of a service providers management, they are endogenous to the business and we do not consider it appropriate to account for them when benchmarking. Work conditions We are satisfied that it is not necessary to provide an operating environment adjustment for differences in work conditions. Service providers' managements are able to negotiate the agreements that they make with their workers. Evans and Peck raised the issue of wage rates as an operating environment factor in its report for Ausgrid. Evans and Peck indicate that differences in wage rates and stand-down provisions in awards may affect both operating and capital cost drivers. The service providers in the NEM all have enterprise agreements. A service provider's management has discretion in reaching an agreement that it strikes with its workforce. The deal that it makes represents a trade-off. The agreement might provide for lower wage rates in return for higher non-salary conditions. Alternatively, it might provide higher wage rates in exchange for productivity improvements. This is a
AER%20%E2%80%93%20Draft%20decision%20Ausgrid%20distribution%20determination%20%E2%80%93%20Attachment%207%20%E2%80%93%20%20Operating%20expenditure%20%E2%80%93%20November%202014_0.DOCX