The Australian Energy Regulator QLD Electricity distribution determination 2015–2020 Consumer/stakeholder forum – No 4 8 August 2014

Topics Welcome & introductions Recap of last meeting – (March) Reset timeline CCP response to consumer issues raised/AER key issues Next steps & how the AER makes its assessment 2

Recap of last meeting Date: 19 March 2014 Main issues of interest were: ◦ Unbundling type 5 & 6 metering services ◦ Public lighting ◦ Application of incentive schemes ◦ Issues raised to CCP included:  Complexity of the system & how to target submissions  Tariffs and modernise schemes  Public lighting 3

Reset timeline 4 30 April 2014 F&A published 31 Oct 2014 Businesses submit regulatory proposals 9 Dec 2014 Public forum – Question the business on proposals. Also release Issues paper 31 Jan 2015 Submissions on regulatory proposals close 30 April 2015 AER publishes preliminary determination Predetermination conference TBC but likely May July 2015 Submissions on revised regulatory proposals close 31 October 2015 AER publishes final determination

Consumer Challenge Panel Consumer issues raised to date and AER/CCP comments 5

The AER’s role in energy Wholesale gas & electricity markets Transmission networks & pipelines Distribution Networks for gas/electricity Retail & other distribution We monitor wholesale markets and enforce rules Prices in the NEM are set by the market subject to the NER AER monitors market outcomes and behaviour We regulate revenues of transmission businesses Charges set by AER Transmission loss factors method set by AEMO Regulatory investments tests – AER assesses compliance We regulate revenues of distribution businesses Distribution prices and structures – AER approves annually subject to determination and NER Reliability standards – set by Qld Govt Incentive schemes – defined in NER and set by AER at reset Rate of return – NER and AER guideline – set at reset for 5 years We will regulate non- price retail activities National Energy Customer Framework - AER Retail price approach – Qld Govt (and QCA) CSO / UTP– Qld Govt Adoption of NECF – Qld Govt

How we assess proposals (1) We must make decisions that contribute to the achievement of the NEO (to the greatest degree). NEO – promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to – ◦ Price, quality, safety, reliability of supply of electricity; and ◦ The reliability, safety and security of the national electricity system. 7

How we assess proposals (2) Set the total revenue a business can earn over 5 years – knock out monopoly profits Control mechanism – revenue can be controlled through capping prices of individual services or by capping the total revenue Classification of services – what services will we regulate Must look to the National Electricity Rules (NER) and building block components 8

How we assess proposals (3) Key aspects of NER: ◦ Regulatory asset base ◦ Rate of return ◦ Capex objectives ◦ Opex objectives ◦ Depreciation ◦ Schemes ◦ Numerous ‘constituent decisions’ 9

How we assess proposals (4) The building blocks: 10

How we assess proposals (5) Incentive schemes: ◦ Service target performance incentive scheme (STPIS) ◦ Efficiency benefit sharing scheme (EBSS) ◦ Capital expenditure sharing schemes (CESS) ◦ Demand management incentive scheme (DMIS) 11

Other relevant points Pricing ◦ Arrangements for setting prices for 5 year period set at determination ◦ Prices are set annually (with year 1 prices set in determination) Metering Annual reporting Changes to the NER ◦ Pricing, demand management, role of DNSPs in metering 12

Qld reset - AER contacts Moston Neck Robyn Lowien