Base opex As opex is relatively recurrent, we typically forecast on a single year of opex. We call this the base opex amount. In this section, we set out our assessment of AusNet Services' base opex. Final decision We have used a base opex amount of $210.2 million ($2015) in our final decision opex forecast. The comparison of the base opex amount in our preliminary decision, AusNet Services' revised proposal and our decision is outlined below in Table A.1. Table . Base opex ($ million, 2015) Preliminary decision Revised proposal Final decision Reported 2014 opex 197.7 197.1 196.2 AMI cost reallocation - 20.4 9.1 Other adjustments 4.9 6.6 4.9 Base opex 201.0 224.2 210.2 Source: AER, AusNet Services preliminary decision opex model, October 2015; AusNet Services, 2016-20 Revised Regulatory Proposal Opex Model; AER, AusNet Services final decision opex model, May 2016. AusNet Services' revised proposal and submissions AusNet Services forecast base opex amount of $224.2 million ($2015) . The differences between AusNet Services' revised proposal and our preliminary decision reflected differences in: the allocation approach to AMI costs the forecasting approaches for self insurance and debt raising costs how base opex is inflated from nominal dollars to real $2015. We received several submissions in response to our preliminary decisions for the Victorian service providers either disagreed with our conclusions on base opex or requested further evidence to support our decision. In particular, VECUA considered there is extensive evidence of material inefficiencies in some Victorian distributors’ opex. It considered that this has been revealed by our benchmarking. As a result, it considered using a revealed cost method to be flawed and a benchmarking approach should be used. It considered CitiPower to be the benchmark provider. More generally, VECUA considered that in setting base opex we have had insufficient regard to:
Base opex As opex is relatively recurrent, we typically forecast on a single year of opex. We call this the base opex amount. In this section, we set out our assessment of AusNet Services' base opex. Final decision We have used a base opex amount of $210.2 million ($2015) in our final decision opex forecast. The comparison of the base opex amount in our preliminary decision, AusNet Services' revised proposal and our decision is outlined below in Table A.1. Table . Base opex ($ million, 2015) Preliminary decision Revised proposal Final decision Reported 2014 opex 197.7 197.1 196.2 AMI cost reallocation - 20.4 9.1 Other adjustments 4.9 6.6 4.9 Base opex 201.0 224.2 210.2 Source: AER, AusNet Services preliminary decision opex model, October 2015; AusNet Services, 2016-20 Revised Regulatory Proposal Opex Model; AER, AusNet Services final decision opex model, May 2016. AusNet Services' revised proposal and submissions AusNet Services forecast base opex amount of $224.2 million ($2015) . The differences between AusNet Services' revised proposal and our preliminary decision reflected differences in: the allocation approach to AMI costs the forecasting approaches for self insurance and debt raising costs how base opex is inflated from nominal dollars to real $2015. We received several submissions in response to our preliminary decisions for the Victorian service providers either disagreed with our conclusions on base opex or requested further evidence to support our decision. In particular, VECUA considered there is extensive evidence of material inefficiencies in some Victorian distributors’ opex. It considered that this has been revealed by our benchmarking. As a result, it considered using a revealed cost method to be flawed and a benchmarking approach should be used. It considered CitiPower to be the benchmark provider. More generally, VECUA considered that in setting base opex we have had insufficient regard to:
AER%20-%20Final%20decision%20AusNet%20distribution%20determination%20-%20Attachment%207%20-%20Operating%20expenditure%20-%20May%202016.DOCX