Should any of these costs be included in the distribution determination process? |
Posted: February 14, 2017 |
Specifically,
and as set out in detail below, the Victorian DNSPs
would resist very strongly any suggestion that it w
ould be more consistent with the national electricity
objective and/or the revenue and pricing principles for such costs to be forecast as a part of the
operating expenditure building block in the distri
bution determination process, as opposed to dealing
with these costs through the annual
pricing proposal process.
Whilst recovery of the identified
cost components by DNSPs is clearly consistent with the national
electricity objective and the revenue and pricing princi
ples - the classification
of the identified cost
components as operating expenditure, and recovery
of them as a part of forecast operating
expenditure would not promote the national electricit
y objective and the revenue and pricing principles
to the same extent as would the recovery of
these costs through the DNSPs annual pricing proposal
process.
The rule change proposal involves explicitly provid
ing for the recovery of the cost components via the
annual pricing proposal process. The direct pass
through of the actual costs which a DNSP incurs in
relation to the identified cost components via the annual pricing process ensures that a DNSP will
recover only its actual charges, while simultaneously
providing an assurance to end-users that they
will only pay for the actual expenses incurred by a DN
SP in respect of the relevant cost components.
The approach set out in the rule change proposal
has considerable merit over an alternative method
which might result in DNSPs having to characterise the relevant cost components as forecast
operating expenditure.
The Victorian DNSPs are not aware of any DNSP wi
th a relevant distribution determination made by
the AER under Chapter 6 which recovers charges
associated with transmission connection costs,
avoided TUOS payments and inter-DNSP payments as
part of an operating expenditure forecast
pursuant to clause 6.5.6 of the Rules. That is,
the Victorian DNSPs understan
d that all DNSPs that
have a relevant distribution determination made by
the AER under Chapter 6 (or relevant transitional
provisions) recover transmission-related costs as
pass through amounts wh
ich are approved pursuant
to their annual pricing proposals.
The presumption should also not be made that DNSPs
are able to recover all transmission-related
payments as forecast operating ex
penditure pursuant to clause 6.5.6. Even if it were feasible, an
outcome of this nature would not necessar
ily be desirable from a policy perspective.
Setting to one side the issue of whether transmi
ssion service charges, inter-DNSP payments and
avoided customer TUOS charges could form part of
a DNSP’s forecast operating expenditure, there is
a real policy question as to whether a framework that
provides for the recovery of these charges as a
part of forecast operating expenditure is either desi
rable or preferable to the current counterfactual.
A DNSP would encounter obstacles when prepari
ng forecasts of inter-DNSP payments, avoided
customer TUOS charges, and costs associated wi
th transmission services (such as transmission
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