Figure 1 Indicative reference tariff paths for Envestra Victoria's reference services from 2013 to 2017 ($/GJ, nominal) Source: AER analysis. Note: This chart shows an indicative tariff path, based on forecast revenues and forecast demand for Envestra’s network. Envestra’s actual tariffs will first be updated on 1 July 2013 to reflect the AER’s decision. For this reason, the indicative 2013 tariff above is an average of the higher 2012 tariffs, and lower 2013 tariffs (from 1 July 2013 to 31 December 2013) to reflect the AER’s decision. On 1 January 2014, the AER’s draft decision forecasts that actual tariffs will increase to reflect CPI. Figure 2 Indicative reference tariff paths for Envestra Albury's reference services from 2013 to 2017 ($/GJ, nominal) Source: AER analysis. Note: This chart shows an indicative tariff path, based on forecast revenues and forecast demand for Envestra’s network. Envestra’s actual tariffs will first be updated on 1 July 2013 to reflect the AER’s decision. For this reason, the indicative 2013 tariff above is an average of the higher 2012 tariffs, and lower 2013 tariffs (from 1 July 2013 to 31 December 2013) to reflect the AER’s decision. On 1 January 2014, the AER’s draft decision forecasts that actual tariffs will increase to reflect CPI. Impact on residential bills In Envestra's Victorian and Albury distribution networks, gas distribution reference services comprise approximately 31 per cent and 25 per cent of an average residential gas bill, respectively. The draft decision on Envestra Victoria will result in an approximate increase of $7 per annum to an average residential bill over the 2013–17 access arrangement period. This compares with an estimated increase of $57 per annum ($nominal) that would have resulted from Envestra Victoria's proposal. The draft decision on Envestra Albury will result in an approximate increase of $5 per annum to an average residential bill over the 2013–17 access arrangement period. This compares with an increase of $22 per annum ($nominal) that would have resulted from Envestra Albury's proposal.
Envestra's proposed forecast capex and depreciation. See overview sections 5 and 7 and attachments 3 and 5 for more on the AER's draft decision on these matters. These adjustments result in a $6.6 million and $0.6 million reductions to Envestra's proposed opening capital bases at 1 January 2013 for its Victoria and Albury networks respectively. The AER's draft decision is for opening capital bases of $1109.7 million and $34.6 million ($nominal) as at 1 January 2013 for Envestra's Victoria and Albury networks respectively. Based on these, and the AER's draft decisions on forecast capex, depreciation, and inflation, the AER has determined projected closing capital bases as at 31 December 2017 of $1375.1 million and $37.1 million ($nominal) for Envestra's Victoria and Albury networks respectively. The AER also does not approve Envestra's proposal to use actual depreciation rather than forecast depreciation to establish its opening capital bases as at 1 January 2018. The AER considers the use of forecast depreciation (approved in the final decision for this access arrangement review) to roll forward the capital base from 2013–17 at the next access arrangement review is a preferable alternative that complies with the requirements of the NGO and the revenue and pricing principles. See attachment 2 for more on the AER's draft decision on the capital bases and reasons for this.
ARS 11.7 11.7 –0.0 Total 364.8 293.9 –70.8 Source: AER analysis Envestra Albury proposed and AER’s draft decision on opex ($million, 2011) Envestra proposal AER draft decision Difference Base year costs 9.1 11.8 2.7 Errors –0.0 0.0 Labour cost escalation 0.5 0.2 –0.3 Materials cost escalation 0.6 – –0.6 Network growth 0.1 0.1 0.0 Step changes 0.8 0.2 –0.6 NMF 0.5 0.4 –0.1 Incentive fee – – – ARS 0.7 0.7 – Total 12.3 13.5 1.1 Source: AER analysis As can be seen from table 9.3 and table 9.4, the main differences between Envestra’s proposed opex and the AER’s draft decision on opex relate to step changes and differences in the labour cost escalation. These and other differences are discussed below. Base year costs Envestra proposed 2011 as the base year, proposing base year expenditure as 2011 actual expenditure less certain costs. The base year costs are determined by taking actual opex from the fourth year of the 2008–12 access arrangement period, indexing these figures and making any required adjustments. The AER's base year estimate for opex is set on the basis of actual 2011 costs incurred by Envestra. In forming this estimate, the AER made adjustments to the costs incurred by Envestra in 2011 to remove movement in provisions and licence fees.