13.2 Compliance with the tariff class side constraints 34 13.3 Compliance with LRMC, avoidable and stand alone cost requirements 34 13.4 Transaction costs 36 13.5 Response to signals 36 14 Price Modelling 37 Part C: Attachments 38 Attachment 1 – Network Service Classification 38 Attachment 2 – Cost of Supply Modelling 43 Attachment 3 – Tariffs for 2015/16 50 Attachment 4 – Compliance Checklist 53 Attachment 5 – Glossary 59
5 Tariff Classes Explains how the tariff classes, into which Power Networks’ customers of standard control services are divided, have been constituted. 6 Reference Tariffs for Direct Control Services Explains the factors that Networks has taken into account in establishing tariffs for direct control services. 7 Efficient Network Pricing Sets out how Power Networks has observed economic principles in establishing its tariffs and their charging parameters. 8 Price Modelling Describes the Pricing Proposal Model (confidential) that is submitted as an attachment to this document. PART B: 2015/16 NETWORK PRICING PROPOSAL 9 Power Networks’ Tariff Strategy Outlines Power Networks’ network tariff strategy for the 2014-19 regulatory control period. 10 Tariff Classes and Tariffs Outlines the tariff classes and the proposed tariffs for each tariff 11 Tariff Charging Parameters Sets out, for each proposed tariff, the charging parameters and the elements of service to which each charging parameter relates. 12 Power Networks’ Revenue and Tariff Changes – 2015/16 Sets out the expected weighted average revenue for each tariff class and the increase to each tariff charging parameter in 2015/16. 13 Customer Impacts Considers the impact of the 2015/16 prices on customers and the nature of any variations and adjustments that occur to tariffs. 14 Compliance This chapter demonstrates the compliance of Power Networks’ proposed network tariffs for the 2015/16 regulatory year. 15 Price Modelling Describes the Pricing Proposal Model (confidential) that is submitted as an attachment to this document. PART C: ATTACHMENTS Attachment 1 Network Service Classification Includes the Commission’s classification of Power Networks’ network access services, as per the 2014 NPD Final Determination. Attachment 2 Cost of Supply Modelling Description of Networks’ approach to modelling the cost of supply. Attachment 3 Tariffs for 2015/16 Power Networks’ proposed standard control network tariffs for 2015/16. Attachment 4 Compliance Checklist Checklist of compliance requirements cross-referenced to sections of this Pricing Proposal. Attachment 5 Glossary Abbreviations used in this document. Confidential Attachment 6 Cost of Supply (2015/16 Pricing Proposal Model) Modelling of the cost of providing standard network access services.
Where practicable, transaction costs in the provision of the services were reduced in 2014/15 by grouping similar services and eliminating some services for which there was little demand in 2013/14; and The labour rates used in estimating the 2015/16 prices for alternative control services do not include corporate overheads. Efficient Network Pricing In ensuring the reference tariffs for direct control services are established in accordance with recognised economic principles, Power Networks has taken into consideration the factors set out in Table 5. 5 – Power Networks’ consideration of efficient pricing Efficient costs RIN clause 16.4; and TPA Code clause 74(1)(a) Power Networks’ consideration taken into account the long run marginal cost for the service or, in the case of a charging parameter, for the element of the service to which the charging parameter relates Power Networks has calculated the LRMC using the Average Incremental Cost for the high and low voltages of its network, based on demand related capital expenditure, an allowance for operating and maintenance expenditure, and demand growth. This calculation is contained in Power Networks’ Cost of Supply Model described in Attachment A2.6. Section 13.3.1 of Power Networks’ 2015/16 Network Pricing Proposal (Part B) describes the way in which Power Networks has taken into account the LRMC in setting the charging parameters of individual tariffs. had regard to: (i) transaction costs associated with the tariff or each charging parameter; and (ii) whether customers of the relevant tariff class are able or likely to respond to price signals. Power Networks is simplifying the tariffs of larger (annual consumption greater than 750 MWh) commercial customers, by progressively reducing the number of energy and demand blocks for kVA and kWh customers down to three in 2015/16 from five in the previous year. This matter is addressed in more detail in section 13.4. The price signals embodied in Power Networks’ tariffs are subject to many considerations. They have been aligned to the maximum extent practical with the LRMC for the network, with the express intention of minimising distortionary pricing arrangements. In this way, the probability of customers responding in a way that will mitigate demand growth is maximised. This matter is addressed in more detail in section 13.5. Modelling As per clause 16.5 of the RIN, Power Networks has provided its Cost of Supply Model (2015/16 Pricing Proposal Model) to the Commission as Confidential Attachment 6 to