expenses are above the opex allowance in the final decision. Therefore, we have modelled additional scenarios where the service provider is able to reduce the difference between: its revised proposal opex and our final decision on the opex that would be faced by the benchmark efficient entity. In scenario 3, we assume Ausgrid reduces the difference between its proposed opex and our (indicative) final decision by 10 per cent per year. This means it would reach our opex target in 10 years. In scenario 4, we assume Ausgrid reduces the difference between its proposed opex and our (indicative) final decision by 20 per cent per year. This means it would reach our opex target in 5 years. We have not attempted to determine which of scenarios 2–4 is the most plausible, but have used the results to assess the sensitivity of the conclusions to whether the service provider can improve its opex efficiency. Table 204 Opex efficiency gains ($ million, 2013–14) Item 2014–15 2015–16 2016–17 2017–18 2018–19 AER indicative 358.1 363.0 369.6 363.6 368.9 1 final decisiona Ausgrid 490.2 513.2 497.1 493.9 492.3 2 revised proposal Difference 132.1 150.1 127.4 130.4 123.4 between 3 and efficient baselineb Difference 118.9 120.1 89.2 78.2 61.7 with 50% 4 efficiency gains (10% p.a.)c Difference 105.7 90.1 51.0 26.1 0.0 with 100% 5 efficiency gains (20% p.a.)d Opex costs 477.0 483.2 458.8 441.8 430.6 with 50% 6 efficiency gainse Opex with 463.8 453.1 420.6 389.6 368.9 100% 7 efficiency gainsf (a) At the time this analysis was provided to RSM Bird Cameron, decision inputs were not completely finalised. However, they are closely reflective of the final decision inputs. (b) This is equal to item 2 less item 1
expenses are above the opex allowance in the final decision. Therefore, we have modelled additional scenarios where the service provider is able to reduce the difference between: its revised proposal opex and our final decision on the opex that would be faced by the benchmark efficient entity. In scenario 3, we assume Ausgrid reduces the difference between its proposed opex and our (indicative) final decision by 10 per cent per year. This means it would reach our opex target in 10 years. In scenario 4, we assume Ausgrid reduces the difference between its proposed opex and our (indicative) final decision by 20 per cent per year. This means it would reach our opex target in 5 years. We have not attempted to determine which of scenarios 2–4 is the most plausible, but have used the results to assess the sensitivity of the conclusions to whether the service provider can improve its opex efficiency. Table 204 Opex efficiency gains ($ million, 2013–14) Item 2014–15 2015–16 2016–17 2017–18 2018–19 1 AER indicative final decisiona 358.1 363.0 369.6 363.6 368.9 2 Ausgrid revised proposal 490.2 513.2 497.1 493.9 492.3 3 Difference between and efficient baselineb 132.1 150.1 127.4 130.4 123.4 4 Difference with 50% efficiency gains (10% p.a.)c 118.9 120.1 89.2 78.2 61.7 5 Difference with 100% efficiency gains (20% p.a.)d 105.7 90.1 51.0 26.1 0.0 6 Opex costs with 50% efficiency gainse 477.0 483.2 458.8 441.8 430.6 7 Opex with 100% efficiency gainsf 463.8 453.1 420.6 389.6 368.9 (a) At the time this analysis was provided to RSM Bird Cameron, decision inputs were not completely finalised. However, they are closely reflective of the final decision inputs. (b) This is equal to item 2 less item 1
AER%20-%20Final%20Decision%20Ausgrid%20distribution%20determination%20-%20Attachment%2020%20-%20Analysis%20of%20financial%20viability%20-%20April%202015.docx