ERA – Revised decision Mid-West and South-West gas distribution

Access Arrangements & Price Determinations

Oct 25
ERA – Revised decision Mid-West and South-West gas distribution

On 25 October 2016, the Economic Regulation Authority (ERA) published its revised decision on the Mid-West and South-West gas distribution network for ATCO Gas Australia.  This follows the determination from the Australian Competition Tribunal published on 13 July 2016 which directed the ERA to make certain revisions to its Amended Final Decision (published in September 2015), namely to recalculate regulated revenue with reference to a gamma of 0.25 (rather than the 0.4 used previously).  Simply, reducing gamma lowers the value of imputation credits and in turn increases net tax, which as one of the regulatory building blocks, increases regulated revenue.

This changes key elements of the revenue requirement as follows (real $000’s at 30 June 2014).

Building block Final decision

Sep 2015

Revised decision

Oct 2016

Regulatory Operating Expenditure 326.43 326.15
Return on Capital 316.78 319.01
Regulatory Depreciation 101.38 101.28
Regulatory Corporate Income Tax 11.74 14.56
Total Revenue 756.33 761.00

Revised tariffs based on the revised regulated revenue figure will apply from 1 January 2017.  With the exception of standing charges to residential customers, all ATCO Gas Australia’s tariffs are forecast to reduce over the remainder of the access arrangement period.  However, with the increase in regulated revenue illustrated above, the reductions are slightly less than those from the ERA’s Amended Final Decision.