The test of rate of return ruling will be its impact on investment

A final decision by the Australian Energy Regulator (AER) to keep its rate of return approach for regulated networks largely in line with the 2018 settings will be a key factor affecting networks’ capacity to deliver the energy transition, Energy Networks Australia CEO Andrew Dillon said today.

The AER’s Draft Decision in June 2022 to switch to a five-year term for Government Bonds reversed two decades of practice in estimating a fundamental element of the equity allowance. The AER has moved back to a 10-year term in its final decision.

“This is a better outcome for investment certainty under the framework,” Mr Dillon said.

“The AER’s final decision will better support Australia’s capacity to attract the private capital required to help decarbonise the energy grid.

“Through their conversations with customers, energy networks are deeply aware of the cost of living pressures facing households and businesses.

“Ensuring we get timely investment in our energy networks to connect the growing wave of renewable generation is the best way to manage rising power bills.”

Mr Dillon said that as energy grids globally competed for investment capital to support decarbonisation, the greater stability delivered by this final decision was a positive development for both networks and customers.

Mr Dillon noted that federal and state governments would still have to implement other measures that recognise the urgent need to bring forward critical network investments that have been identified as being the best ways to lower costs to customers.

The AER Decision can be found here