Addressing key gaps in the regulatory investment test

Over the past five years, the NSW networks have increased their regulated asset base (RAB) through capital expenditure to augment the system. The RAB determines a significant part of the regulated revenue the networks are able to receive. The networks have reached a limit on how much more augmentation can occur at the moment. In this context, consumer groups are concerned that the networks will use the replacement of assets as a means to further increase their revenue. Therefore PIAC welcomes the AER’s proposed rule change and supports the introduction of greater clarity and consistency in the reporting of asset replacement. This will facilitate greater uptake of non-network solutions and greater competition in the provision of these services, both of which are highly likely to benefit customers. PIAC is also of the view that the rule change should go further to capture a number of issues beyond those raised by the AER. It is timely that COAG is reviewing the RIT-T, and it is an oversight to not review the RIT-D at the same time. The AEMC should take the COAG review into account in considering this rule change.