Note This overview forms part of the AER's preliminary decision on Energex's 2015–20 distribution determination. It should be read with all other parts of the preliminary decision. The preliminary 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
Alternative control services do not form part of Energex's revenue cap. Rather, the prices of these services are set individually. Our preliminary decision is to maintain the approach adopted in our F&A, that the form of control mechanism to apply to Energex's alternative control services will be price caps. Energex must demonstrate compliance with the control mechanism through an annual pricing proposal. To avoid large metering transfer or exit fees, we consider Energex should recover the residual cost of its redundant meters from all customers through an alternative control service charge. By switching, customers may avoid the operating costs that would be charged by Energex for type 5 or 6 metering services. We did not approve large upfront metering transfer or exit fees which would be a barrier to competitive entry. Instead, when a customer switches to a competitive metering provider, they will continue to pay a regulated annual charge that recovers the fixed capital costs associated with their past regulated type 5 or 6 metering service. On 26 March 2015, the AEMC made a draft determination and draft rule in relation to the provision of metering and related services in the NEM. The rule change proposes to expand competition in metering and related services and facilitate a market led roll out of advanced metering technology. We have sought to create a regulatory framework robust enough to handle the transition to competition once the rule change takes effect from 1 July 2017. Our preliminary decision does not accept Energex's proposed: annual metering service charge, because the forecast capital and labour costs do not reasonably reflect the efficient costs of a prudent operator price caps for new and upgraded connections, for similar reasons transfer or exit fee to switching customers to recover residual metering or administrative costs. Incentive schemes Incentive schemes are a component of incentive-based regulation and complement our approach to assessing efficient costs. The incentive schemes that will apply to Energex are: The efficiency benefit sharing scheme (EBSS) The capital expenditure sharing scheme (CESS) The service target performance incentive scheme (STPIS) The demand management incentive scheme (DMIS). Efficiency benefit sharing scheme The efficiency benefit sharing scheme (EBSS) provides an additional incentive for service providers to pursue efficiency improvements in opex.
To allow consumers to receive the benefit of the new rules the AEMC made transitional rules under chapter 11 of the NER. The NER provide that we will: make a preliminary determination for the 2015−20 regulatory control period by 30 April 2015 use the preliminary determination as a basis for approving prices for 1 July 2015 to 30 June 2016 it will also set out how we will apply a revenue adjustment that will 'true up' Energex's revenue over the regulatory control period to account for any difference between the preliminary determination and the final decision affecting its revenue for the 2015−16 regulatory year. The true-up will be calculated using forecasts as actual data for 2014−15 that will not be available when the final decision is published in October 2015.