The Australian Energy Regulator SA electricity distribution determination 2015–2020 Framework and approach Presentation to the Energy Consumers’ Council 5 February 2014

TOPICS AER preliminary position on F&A Next steps in the F&A process SAPN price review process Consumer engagement Key issues for consumers 2

SA F&A | Preliminary position Preliminary position released on 20 December ◦ Service classification ◦ Control mechanism ◦ Incentive schemes ◦ Other matters Written submission close on 19 February 2014 Final F&A to be published in April

SA F&A | Service classification 4

SA F&A | Key changes Some Type 6 metering services currently classified as standard control. ◦ Energy data and storage services ◦ Metering investigation ◦ Unscheduled meter reading AER’s preliminary position is to reclassify these services as alternative control services. Both SAPN’s standard and alternative control services are currently under a WAPC form of control. AER’s preliminary position is to move standard control service to revenue cap, and alternative control service to individual price cap. 5

SA F&A | Incentive schemes AER’s preliminary position is to apply the following schemes ◦ Efficiency benefit sharing scheme ◦ Service target performance incentive scheme ◦ Demand management incentive scheme ◦ Capital expenditure sharing scheme (New scheme) 6

SA F&A | Other matters Forecasting methodology ◦ Application of the expenditure forecast assessment guideline ◦ SAPN forecasting methodology submitted on 29 November 2013 Depreciation ◦ Use forecast rather than actual depreciation to establish the RAB Side constraint on small customer fixed charges ◦ $10 constraint on annual change in fixed supply charge ◦ We seek stakeholder submissions on whether this should continue or be amended 7

SA price review | Timeline Preliminary positions F&A (submissions close 19/2) December 2013 F&A published 30 April 2014 SA Power Networks submits regulatory proposal 31 October 2014 Submissions on regulatory proposal close January/February 2015 AER publishes draft decision April 2015 Revised regulatory proposal submitted June 2015 Submissions on revised regulatory proposal close 1 July 2015 AER publishes final determination 31 October

SA price review | Engagement Consumer Challenge panel ◦ Provide an independent consumer perspective to challenge the AER and network service providers during determination processes. ◦ Total of 13 members, 6 members selected to form the sub-panel for SA and Qld electricity distribution price determinations. SA consumer workshop ◦ A consumer group will be established for the price review process Public forums ◦ A number of forums will occur - for the regulatory proposal, AER issues paper and draft decision. 9

SA price review | Key issues 2010–15 regulatory control period, SAPN’s revenue is made up of: ◦ Return on capital (related to rate of return and capex) – 43.3% ◦ Opex – 29.3% ◦ Return of capital (related to depreciation) – 16.4 % ◦ Tax – 10.9% Rate of return Capex and opex driven by ◦ Growth ◦ Asset replacement ◦ Safety and reliability 10

SA F&A | AER Consumer Workshops Capture key issues to consider in our preliminary positions paper Meeting November 2013 Discuss issues raised in our preliminary positions paper, prior to the deadline for written submissions Meeting January 2014) Discuss how we are considering submissions received and the likely direction of the final F&A Meeting 3 (week beginning 17 March 2014) 11

QUESTIONS? 12