Note This attachment forms part of the AER's final decision on Energex's 2015–20 distribution determination. It should be read with all other parts of the final decision. The final decision includes the following documents: Overview Attachment 1 – Annual revenue requirement Attachment 2 – Regulatory asset base Attachment 3 – Rate of return Attachment 4 – Value of imputation credits Attachment 5 – Regulatory depreciation Attachment 6 – Capital expenditure Attachment 7 – Operating expenditure Attachment 8 – Corporate income tax Attachment 9 – Efficiency benefit sharing scheme Attachment 10 – Capital expenditure sharing scheme Attachment 11 – Service target performance incentive scheme Attachment 12 – Demand management incentive scheme Attachment 13 – Classification of services Attachment 14 – Control mechanism Attachment 15 – Pass through events Attachment 16 – Alternative control services Attachment 17 – Negotiated services framework and criteria Attachment 18 – Connection policy
Energex supported the proposed approach set out in the preliminary decision to continue applying Part A (the DMIA) of the DMIS at the same it is currently applied. AER’s assessment approach The rules require us to have regard to several factors in developing and implementing a DMIS for Energex. These are: Benefits to consumers the need to ensure that benefits to electricity consumers likely to result from the scheme are sufficient to warrant any reward or penalty the scheme the willingness of customers or end users to pay for increases in costs resulting from implementing DMIS. Balanced incentives the effect of a particular control mechanism (i.e. price as distinct from revenue regulation) on a distributor's incentives to adopt or implement efficient non-network alternatives the effect of classification of services on a distributor's incentive to or implement efficient embedded generator connections the extent the distributor is able to offer efficient pricing structures the possible interactions between DMIS and other incentive schemes. We had regard to these factors in considering the proposed approach to the DMIS for Energex as set out in our final F&A and preliminary decision and we have again taken these factors into account in making our final decision. Reasons for final decision We have determined the current innovation allowance amount of $1 million ($2014─15) per annum (or $5 million over the period) will continue in the 2015–20 regulatory control period. Energex supported this approach in their revised proposal. We received a submission from the Total Environment Centre (TEC) which stated they want us to do more to reflect the importance of demand management within the current framework and provide distribution businesses with guidance on how they could design and present effective demand management strategies. TEC believe the current DMIA funds are not enough to be considered a serious alternative to long term investment in load management schemes whilst also questioning the reliance on new mechanisms such as the CESS, RIT-D and tariff reform to incentivise demand management. We acknowledge the need to reform the existing demand management incentive arrangements and the importance of demand management in deferring the need for network augmentation by alleviating network utilisation during peak usage periods. However, quite separately to incentive or innovation allowances, the revenue cap form of control removes any disincentive for distributors to reduce the quantity of electricity sold by pursuing demand management initiatives. More robust obligations to consider