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

2. 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

3. SA F&A | Preliminary position Preliminary position released on 20 December 2013. ◦ Service classification ◦ Control mechanism ◦ Incentive schemes ◦ Other matters Written submission close on 19 February 2014 Final F&A to be published in April 2014. 3

4. SA F&A | Service classification 4

5. 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

6. 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

7. 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

8. 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 2015 8

9. 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

10. 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

11. SA F&A | AER Consumer Workshops Capture key issues to consider in our preliminary positions paper Meeting 1 - 20 November 2013 Discuss issues raised in our preliminary positions paper, prior to the deadline for written submissions Meeting 2 - 22 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

12. QUESTIONS? Email: SAelectricity2015@aer.gov.au 12