The Justice and Equity Centre made a submission to the Australian Energy Regulator’s (AER) review of the Capital Expenditure Guideline. They propose allowing the AER to conduct their standard ‘ex post reviews’ of Network Service Provider (NSP) expenditures on a stage-by-stage basis, rather than reviewing entire projects together. They also propose allowing the AER to adjust the Capital Expenditure Sharing Scheme (CESS) according to an assessment of the efficiency of the NSP’s spending.
We support the first measure. Reducing the materiality of ex post review decisions is in the interests of both NSPs and consumers. For NSPs, it would reduce the amount of uncertainty for them, locking in partial results of the assessment before the end of the project. For consumers, it would empower the AER to more effectively fufil its task of protecting consumer interests in a context where it is often circumscribed in practice by operating in highly politicised environments.
We do not support the second measure however. Not only would it undermine the core assumptions underpinning the scheme as it is currently designed, it would very likely leave consumers worse off by turning the current share of 30% of the cost of over-spends allocated to NSPs into a ceiling.
