total capex and opex allowances to run its network. For example, we do not seek to approve individual capital expenditure (capex) projects that a service provider must then implement. Rather, we determine what costs may reasonably form part of the sum total of revenue that we consider satisfies the requirements of the NGL and NGR. Consistent with incentive regulation, it is then for the service provider to determine the particulars of how this allowance is applied in the next access arrangement period. As the overall revenue allowance is the key binding feature of our draft decision, it is important that we specifically assess its contribution to the achievement of the NEO. Understanding the NGO The NGO is to promote three factors for the long term interests of consumers: efficient investment in efficient operation of efficient use of; natural gas services. Energy Ministers have provided us with a detailed body of analysis and explanation that guides our understanding of the NGO. The long term interests of consumers are not delivered by any one of the NGO's factors in isolation, but rather by balancing them. In general, we consider that we will achieve this balance and, therefore, contribute to the achievement of the NGO where consumers are provided a reasonable level of service at the lowest sustainable price. In most industries, this outcome is achieved through the operation of competition. Competition drives suppliers to refine their offerings to attract customers. Where a supplier’s offering is not attractive it risks being displaced by other suppliers. However, in the energy networks industry the usual competitive disciplines do not operate. The service providers are largely natural monopolies. Many of the products they offer are essential services for most consumers. Consequently, in a non-competitive environment, consumers have little choice but to accept the quality and price service providers offer. The NGL and NGR aim to remedy the absence of competition by empowering us, as regulator, to make decisions that are in the long term interests of consumers. In particular, we might need to require the service providers to offer their services at a different quality or different price than they would choose
total capex and opex allowances to run its network. For example, we do not seek to approve individual capital expenditure (capex) projects that a service provider must then implement. Rather, we determine what costs may reasonably form part of the sum total of revenue that we consider satisfies the requirements of the NGL and NGR. Consistent with incentive regulation, it is then for the service provider to determine the particulars of how this allowance is applied in the next access arrangement period. As the overall revenue allowance is the key binding feature of our draft decision, it is important that we specifically assess its contribution to the achievement of the NEO. Understanding the NGO The NGO is to promote three factors for the long term interests of consumers: efficient investment in efficient operation of efficient use of; natural gas services. Energy Ministers have provided us with a detailed body of analysis and explanation that guides our understanding of the NGO. The long term interests of consumers are not delivered by any one of the NGO's factors in isolation, but rather by balancing them. In general, we consider that we will achieve this balance and, therefore, contribute to the achievement of the NGO where consumers are provided a reasonable level of service at the lowest sustainable price. In most industries, this outcome is achieved through the operation of competition. Competition drives suppliers to refine their offerings to attract customers. Where a supplier’s offering is not attractive it risks being displaced by other suppliers. However, in the energy networks industry the usual competitive disciplines do not operate. The service providers are largely natural monopolies. Many of the products they offer are essential services for most consumers. Consequently, in a non-competitive environment, consumers have little choice but to accept the quality and price service providers offer. The NGL and NGR aim to remedy the absence of competition by empowering us, as regulator, to make decisions that are in the long term interests of consumers. In particular, we might need to require the service providers to offer their services at a different quality or different price than they would choose
AER%20-%20Draft%20decision%20Jemena%20Gas%20Networks%20Access%20arrangement%20-%20Overview%20-%20November%202014.DOCX