The achievement of the long-term interests of energy consumers requires best practice regulation of the natural monopoly network businesses. Best practice is generally agreed to be some form of incentive regulation whereby the network providers are guaranteed a return on their efficient costs but can generate extra returns by driving for efficiency in expenditure.
Best practice also entails reviewing the consequences of previous regulatory decisions, and this is the purpose of profitability reporting. Energy Consumers Australia supports in general the use of multiple profitability measures and specifically supports the choice of measures included in the Paper. The AER should not only provide the profitability reports but also provide comparisons and analysis.
The value of the profitability measures will be revealed in use. Alternatively stated, there are limitations to how effective evaluation of alternative approaches can be as a purely theoretical exercise. We encourage the AER to move swiftly to issue the required Regulatory Information Notices. But we also encourage network businesses to assist the AER in making profitability reporting effective.
The full submission can be read here.