Key elements of the building blocks There is no one tool that by itself determines an overall revenue allowance. Therefore in setting our alternative overall revenue allowance for JGN of $2477.3 million ($ nominal) for the 2015–20 access arrangement period we: apply relevant tests under the NGR, the assessment methods and tools developed as part of our Better Regulation guidelines and consider information provided by JGN, the CCP, consultants and stakeholder submissions consider our total revenue allowance against section 28 of the NGL, including the constituent decisions and the interrelationships we discussed in section 5. The building block approach We have employed the building block approach to determine JGN's total revenue—that is, we based the total revenue on our estimate of the efficient costs that JGN is likely to incur in providing gas distribution network services. The building block costs, as shown in Figure 81, include: return on the projected capital base depreciation on the projected capital base the estimated cost of corporate income tax increments or decrements resulting from the operation of an incentive mechanism to encourage gains in efficiency forecast opex. Our assessment of capex directly affects the size of the capital base and therefore, the revenue generated from the return on capital and depreciation building blocks. Figure 81 The building block approach for determining total revenue The following section summarises our decision by building block and provides our high level reasons and analysis.
Key elements of the building blocks There is no one tool that by itself determines an overall revenue allowance. Therefore in setting our alternative overall revenue allowance for JGN of $2477.3 million ($ nominal) for the 2015–20 access arrangement period we: apply relevant tests under the NGR, the assessment methods and tools developed as part of our Better Regulation guidelines and consider information provided by JGN, the CCP, consultants and stakeholder submissions consider our total revenue allowance against section 28 of the NGL, including the constituent decisions and the interrelationships we discussed in section 5. The building block approach We have employed the building block approach to determine JGN's total revenue—that is, we based the total revenue on our estimate of the efficient costs that JGN is likely to incur in providing gas distribution network services. The building block costs, as shown in Figure 81, include: return on the projected capital base depreciation on the projected capital base the estimated cost of corporate income tax increments or decrements resulting from the operation of an incentive mechanism to encourage gains in efficiency forecast opex. Our assessment of capex directly affects the size of the capital base and therefore, the revenue generated from the return on capital and depreciation building blocks. Figure 81 The building block approach for determining total revenue The following section summarises our decision by building block and provides our high level reasons and analysis.
AER%20-%20Draft%20decision%20Jemena%20Gas%20Networks%20Access%20arrangement%20-%20Overview%20-%20November%202014.DOCX