2003 Victorian Gas Access Arrangement Review Public Forum Essential Services Commission Tuesday, 13

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2003 Victorian Gas Access Arrangement Review
Public Forum Essential Services
CommissionTuesday, 13 August 2002
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Draft Decision

• ESC assessment of DB proposals
• A number of amendments required
• Can be categorised into
• - provision of services
• - X factors (revenue demand assumptions)
• - other price controls tariffs
• - use of system terms conditions

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Draft Decision Overview

• Services
• - Approve proposed reference services adopt GSL
  scheme, various amendments to Terms
  Conditions, Distribution Code
• X Factors
• - X factors to be amended (lower prices)
• - Lower revenue higher demand assumed
• Other price controls
• - Accept proposed form of price control with
  amended formulae
• - Amend approval processes, re-balancing

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Draft Decision Overview

• Amendments reflect ESCs assessment of proposals
  against the Code
• Consideration of responses, comments
• Further consultation
• - Expenditure (especially safety issues)
• - Queries regarding calculations
• - Terms Conditions working group
• - Other workshops if necessary
• Final Decision 2 October 2002

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Services

• Proposed Reference Services
• Non-Reference Services
• GSL Payments Scheme
• Extensions expansions

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GSL Payments scheme

• Appointments
• - 50 if more than 15 minutes late
• Connections
• - 80 per day if not connected within 2 days
  (capped at 240)
• Repeat interruptions
• - 50 per event if more than 3 interruptions in
  a year due to faults
• Lengthy Interruptions
• - 80 if not restored within 12 hours

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Extensions Expansions

• Connection charges
• - economic feasibility test
• - guidelines for application
• Reticulation of towns
• - distributors proposals approved
• - application of economic feasibility
• - net financing costs, efficiency carryover
• - retain discretion

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Revenue Demand

• Operating expenditure
• Capital expenditure
• Efficiency carryover
• Demand
• Finance Issues

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Operating Expenditure

• Base year (2001)
• existing marketing expenditure, licence fee
  recovery through price controls
• Adjustment for scope changes 0.5m
• Annual productivity trend (1)
• Relies on incentives rather than line-by-line
  assessment

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Capital Expenditure

• Envestra accepted
• - (GSL allowance to be added)
• Multinet and TXU proposal for significant
  increases
• Draft Decision assumes a 20 increase in existing
  levels
• Subject to further consultation

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Efficiency Carryover

• Retain gains for 5 years
• Based on expenditure against forecast, adjusted
  for growth
• Envestra proposal for 10 years to be amended
• Multinet allowance of 16.1M for gains made
  during 1998-2001

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Demand

• Draft Decision adopts adjusted (upwards)
  distributor forecasts
• Further consultation on detailed assumptions
• Dealing with queries raised by distributors re
  calculations

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Finance Issues

• Asset base roll-forward
• After tax cost of capital (6.7)
• Cost of tax allowance
• Proposal to lock-in methodology
• Depreciation straight-line method
• Working capital

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Price Controls

• Form of price control
• Rebalancing controls
• Tariffs and tariff structures

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Price Controls

• Accept tariff basket form of control
• Re-balancing constraint of CPI2
• - Some amendments to algebra
• Upper lower bounds for tariffs
• Amend annual approval processes
• Licence fee recovery
• Public Tariff Report