reflecting current (short term) market sentiment. SKM selected Consensus Economics forecasts as the best currently available outlook for oil prices throughout the duration of the next access arrangement period. The decision by SKM to adopt an economic forecast for oil rather than using futures highlights the uncertainty surrounding the forecasting of commodity prices. Comparison of independent expert's cost escalation factors To illustrate the potential uncertainty in forecasting real material input costs, we have compared the material cost escalation forecasts derived by the consultants as shown Table 6.9. Table 6.9 Real material input cost escalation forecasts (per cent) 2014–15 (%) 2015–16 (%) 2016–17 (%) 2017–18 (%) 2018–19 (%) Aluminium CEG 4.2 5.8 5.0 4.2 3.6 SKM 4.69 4.88 3.09 4.42 2.97 BIS Shrapnel 13.3 16.6 1.9 5.1 3.7 Range (low to 4.2 to 13.3 4.88 to 16.6 1.9 to 5.0 4.2 to 5.1 2.97 to 3.7 high) Copper CEG -0.9 1.1 0.3 -0.3 -0.7 SKM -0.17 0.17 -1.15 -0.16 -1.45 BIS Shrapnel 3.5 9.6 0.6 3.6 1.9 Range (low to -0.9 to 3.5 0.17 to 9.6 -1.15 to 0.6 -0.3 to 3.6 -1.45 to 1.9 high) Steel CEG 0.6 3.2 0.6 0.3 -0.1 SKM 2.84 2.45 -0.35 0.38 -1.11 BIS Shrapnel1 2.1 9.2 -1.3 3.7 3.7 Range (low to 0.6 to 2.1 2.45 to 9.2 -1.3 to 0.6 0.3 to 3.7 -1.11 to 3.7 high) Oil CEG -0.5 2.8 2.6 2.1 1.8 SKM -5.11 -0.79 0.74 1.85 0.51 BIS Shrapnel2
reflecting current (short term) market sentiment. SKM selected Consensus Economics forecasts as the best currently available outlook for oil prices throughout the duration of the next access arrangement period. The decision by SKM to adopt an economic forecast for oil rather than using futures highlights the uncertainty surrounding the forecasting of commodity prices. Comparison of independent expert's cost escalation factors To illustrate the potential uncertainty in forecasting real material input costs, we have compared the material cost escalation forecasts derived by the consultants as shown Table 6.9. Table 6.9 Real material input cost escalation forecasts (per cent) 2014–15 (%) 2015–16 (%) 2016–17 (%) 2017–18 (%) 2018–19 (%) Aluminium CEG SKM BIS Shrapnel Range (low to high) 4.2 4.69 13.3 4.2 to 13.3 5.8 4.88 16.6 4.88 to 16.6 5.0 3.09 1.9 1.9 to 5.0 4.2 4.42 5.1 4.2 to 5.1 3.6 2.97 3.7 2.97 to 3.7 Copper CEG SKM BIS Shrapnel Range (low to high) -0.9 -0.17 3.5 -0.9 to 3.5 1.1 0.17 9.6 0.17 to 9.6 0.3 -1.15 0.6 -1.15 to 0.6 -0.3 -0.16 3.6 -0.3 to 3.6 -0.7 -1.45 1.9 -1.45 to 1.9 Steel CEG SKM BIS Shrapnel1 Range (low to high) 0.6 2.84 2.1 0.6 to 2.1 3.2 2.45 9.2 2.45 to 9.2 0.6 -0.35 -1.3 -1.3 to 0.6 0.3 0.38 3.7 0.3 to 3.7 -0.1 -1.11 3.7 -1.11 to 3.7 Oil CEG SKM BIS Shrapnel2 -0.5 -5.11 2.8 -0.79 2.6 0.74 2.1 1.85 1.8 0.51
AER%20-%20Draft%20decision%20ActewAGL%20distribution%20access%20arrangement%20-%20Attachment%206%20-%20Capital%20Expenditure%20-%20November%202015_0.DOCX