Note This attachment part of the AER's final decision on SA Power Networks' 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
providing direct control network services, and complying with its regulatory obligations and requirements. As set out in appendix B we are satisfied that our overall forecast is consistent with the NEO. We consider our decision promotes efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity. We also consider that overall our capex forecast addresses the capital expenditure objectives. In making our final decision, we specifically considered the impact our decision will have on the safety and reliability of SA Power Networks' network. We consider this capex forecast should be sufficient for a prudent and efficient service provider in SA Power Networks' circumstances to be able to maintain the safety, service quality, security and reliability of its network consistent with its current obligations. SA Power Networks' revised proposal SA Power Networks' revised proposal included a total forecast capex of $2070.8 million ($2014–15) for the 2015–20 regulatory control period. This is 23 per cent higher than our preliminary decision and 16.5 per cent lower than SA Power Networks' initial regulatory proposal Figure 6.1 shows the difference between SA Power Networks' initial proposal, its revised proposal and our preliminary decision for the 2015–20 regulatory control period. Figure 6.1 also shows the actual capex SA Power Networks spent during the 2010–15 regulatory control period. Figure Power Networks' total actual and forecast capex Source: AER analysis. SA Power Networks submitted its revised proposal was higher than our preliminary decision in the following key categories: $91 million in replacement capital expenditure to reflect a different predictive modelling output and a higher pole top structure replacement rate $86 million in safety augmentation capital expenditure to enable implementation of its bushfire mitigation program and to deliver on customer concerns $144 million in capex to invest in the non-network category including IT systems, fleet and facilities. AER’s assessment approach This section outlines our approach to capex assessments. It sets out the relevant legislative and rule requirements, and outlines our assessment techniques. It also explains how we derive an alternative estimate of total forecast capex against which
Table 6. Allocation of balancing item to driver ($2014–15 million) Driver Revised proposal Revised proposal (after allocating balancing item) Final decision Augmentation 608.1 592.1 481.1 Connections 536.7 522.5 522.5 Replacement 700.4 681.9 655.1 Non-Network 562.6 562.6 511.2 Capitalised overheads 89.4 89.4 82.1 Escalation adjustment 0.0 0.0 -29.7 Balancing item –48.6 0.0 0.0 TOTAL GROSS CAPEX 2,448.5 2,448.5 2,222.3 Capital contributions 377.7 377.7 377.7 TOTAL NET CAPEX 2,070.8 2,070.8 1,844.6