Public Forum Draft Decision ActewAGL 1 July 2010 to 30 June 2015 - PowerPoint PPT Presentation

Public Forum Draft Decision ActewAGL 1 July 2010 to 30 June 2015 Mr Mike Buckley, General Manager

Background • ActewAGL Network – Owner: Actew Corp & Jemena Limited – Operated by: Jemena Asset Management (JAM) • Access arrangement revision for 1 July 2010 to 30 June 2015 • Review process

Overview • Comprehensive & well supported proposal • Substantive issues include: – Efficiency of operating costs – Increase in proposed capex – Higher proposed return on capital • Higher initial tariffs of 11.6% translating as an average per annum increase of 7.8% over the 5 year period

Operating expenditure 30 $2009-10 million 25 Actual Opex 20 2009/10 Proposed 15 Approved 10 UNFT (cost pass through) 5 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Capital expenditure 100 90 80 70 60 Proposed 50 Approved 40 $2009-10 million 30 20 10 2010-11 2011-12 2012-13 2013-14 2014-15

Capital expenditure - HFL • Expected to provide 88TJ of gas • Represents 1257% of the summer peak per day and 126% of the winter peak per day • AER issues: – Upstream gas supply – Risk mitigation strategies and improved information – Inadequacy of ActewAGL’s business case – Nature of services

WACC Past AA Proposed Approved (converted to post tax) Nominal Vanilla WACC 8.6 11.09 10.14 (%) 6 7.5 6.5 MRP (%) 0.9 1.0 0.8 Equity Beta 1.25 4.96 4.28 DRP (%) N/A 0.65 0.65 Gamma

Tariffs Nominal Initial Average Annual Increase Increase (Nominal, %) (Nominal, %) Tariff 11.6 7.8 -11.1 2.5 Contract 23.9 6.1 Meter Data

Components of tariff change 12 10.05 9.38 10 8.73 8.08 7.59 8 6.80 6 Higher Opex Higher WACC 4 New Capex Inflation Area 1 2 Tariffs $/GJ nominal 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Tariff variations • Tariffs change annually by CPI to adjust for changes in inflation • Tariffs may also change as a result of the cost pass through mechanism • Cost pass throughs approved for: – STTM – CPRS – National Energy Customer Framework

Non-tariff terms & conditions • Extensions policy provides the AER with more discretion as to what extensions are included under the access arrangement • Trigger events included to account for national customer and gas connections policy developments

Process – where to from here? Proposal 30 June 2009 11 September Submissions Draft decision 11 November 6 January Revised proposal 12 February Submissions Final decision April 2010

Questions