Revised Revenue Proposal - TransGrid ¢â‚¬› what-we-do...

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Transcript of Revised Revenue Proposal - TransGrid ¢â‚¬› what-we-do...

  • Revised Revenue Proposal

    2018/19 – 2022/23

  • CONTENTS | 2018/19-2022/23 C

    Page 3 of 158

    1. Executive Summary................................................................................................................. 6

    1.1 TransGrid’s Revised Revenue Proposal 2018/19 – 2022/23 .......................................... 6

    1.2 Recent changes in the sector .......................................................................................... 6

    1.3 Reducing prices for electricity consumers ....................................................................... 7

    1.4 Consumer consultation .................................................................................................... 8

    2. Introduction and Context ...................................................................................................... 10

    2.1 TransGrid’s Revised Revenue Proposal ....................................................................... 10

    2.2 Overview of the Revised Proposal ................................................................................ 10

    2.3 Changes in the sector since January 2017 ................................................................... 14

    2.4 Consumer consultation .................................................................................................. 18

    2.5 Maximum Allowed Revenue building blocks ................................................................. 18

    2.6 Price path ....................................................................................................................... 19

    3. Consumer Engagement ........................................................................................................ 20

    3.1 Introduction .................................................................................................................... 20

    3.2 Engagement since submission ...................................................................................... 22

    3.3 Key issues raised by the AER in its draft determination ............................................... 25

    3.4 Key issues raised by the CCP ....................................................................................... 27

    3.5 Powering Sydney’s Future ............................................................................................. 30

    3.6 Response to public submissions ................................................................................... 32

    4. Capital Expenditure ............................................................................................................... 36

    4.1 Introduction .................................................................................................................... 36

    4.2 Overview ........................................................................................................................ 36

    4.3 TransGrid’s overarching response ................................................................................ 43

    4.4 Powering Sydney’s Future ............................................................................................. 51

    4.5 Replacement expenditure (including Security & Compliance) ...................................... 62

    4.6 Augmentation (excluding PSF) ...................................................................................... 82

    4.7 IT expenditure ................................................................................................................ 92

    4.8 Contingent projects ........................................................................................................ 95

    4.9 Network support events ............................................................................................... 105

    4.10 Network Support and Control Ancillary Service .......................................................... 105

    5. Operating Expenditure ........................................................................................................ 108

    5.1 Introduction .................................................................................................................. 108

    5.2 Summary of TransGrid Proposal ................................................................................. 110

    5.3 Summary of AER’s Draft Decision ............................................................................... 112

    5.4 TransGrid’s Revised Proposal ..................................................................................... 113

    5.5 Base operating expenditure ......................................................................................... 115

  • TRANSGRID REVISED REVENUE PROPOSAL | 2018/19-2022/23 C

    Page 4 of 158

    5.6 Rates of change ........................................................................................................... 116

    5.7 Step Changes .............................................................................................................. 120

    5.8 Debt Raising Costs ...................................................................................................... 121

    6. Incentive Schemes .............................................................................................................. 122

    6.1 Introduction .................................................................................................................. 122

    6.2 Capital Expenditure Sharing Scheme .......................................................................... 122

    6.3 Service Target Performance Incentive Scheme .......................................................... 124

    6.4 Efficiency Benefit Sharing Scheme ............................................................................. 126

    7. Rate of Return ...................................................................................................................... 138

    7.1 Introduction .................................................................................................................. 138

    7.2 TransGrid’s approach .................................................................................................. 138

    7.3 Cost of debt .................................................................................................................. 140

    7.4 Cost of equity ............................................................................................................... 140

    7.5 Averaging Periods ........................................................................................................ 141

    7.6 TransGrid’s revised proposal ....................................................................................... 141

    8. Depreciation & Regulatory Asset Base ............................................................................. 142

    8.1 Depreciation ................................................................................................................. 142

    8.2 Regulatory Asset Base ................................................................................................ 143

    9. Maximum Allowed Revenue ............................................................................................... 146

    9.1 Building Block Approach .............................................................................................. 146

    10. Pass through events, Negotiating Framework and Pricing Methodology .................... 152

    10.1 Introduction .................................................................................................................. 152

    10.2 Pass through events .................................................................................................... 152

    10.3 Negotiating framework ................................................................................................. 153

    10.4 Pricing Methodology .................................................................................................... 153

    11. Glossary ................................................................................................................................ 154

    12. Appendices........................................................................................................................... 158

  • CONTENTS | 2018/19-2022/23 C

    Page 5 of 158

  • EXECUTIVE SUMMARY | 2018/19-2022/23 1

    Page 6 of 158

    1. Executive Summary

    1.1 TransGrid’s Revised Revenue Proposal 2018/19 – 2022/23

    TransGrid is pleased to submit our revised revenue proposal to the Australian Energy Regulator (AER)

    which will reduce transmission costs for electricity consumers in NSW and the ACT. Our proposed

    investments and operational funding will allow us to maintain a safe and reliable electricity service to

    households and businesses and deliver greater price relief than proposed in our revenue proposal

    lodged in January 2017.

    TransGrid acknowledges that electricity prices are currently of significant concern for Australians.

    In preparing our revised proposal, we have not only paid heed to the AER’s recent draft decision on our

    proposal, we have also responded to the views and expectations of our customers and the community.