ACCC issues draft Snowy Mountains Hydro-Electric Authority transmission network revenue cap

The Australian Competition and Consumer Commission today issued its draft decision on the revenue cap for transmission networks of the Snowy Mountains Hydro-Electric Authority.

The draft decision proposes the maximum revenue that may be earned from electricity transmission (the physical wires infrastructure used for transporting high voltage electricity) by the SMHEA until 30 June 2004.

"This draft decision is the second made by the ACCC as the economic regulator of electricity transmission networks in the National Electricity Market", Acting ACCC Chairman, Mr Allan Asher, said today.

The ACCC's decision is in accordance with the principles in the National Electricity Code, which was established to create competition in the electricity market and provide customers with a choice of suppliers.

Consistent with these principles, the ACCC, in its draft decision, has set an opening asset base of $62.45 million for regulatory purposes, using the optimised depreciated replacement cost methodology. 

The ACCC has chosen to apply a post-tax nominal return on equity of 12.65 per cent, which it believes is close to the mid point of a feasible range. 

"Although, there are differences between transmission and distribution businesses the ACCC’s draft decision on the SMHEA’s return on equity is consistent with last week's decision by the Office of the Regulator General for Victorian Distribution Businesses".

On the basis of the information provided, the ACCC estimated maximum revenues of approximately $9 million per annum over the regulatory period.

Matters such as the appropriate asset value, the cost of equity capital and the treatment of capital expenditure raise a number of substantive issues.  The ACCC welcomes feedback and submissions on these issues.

The ACCC will hold a public forum on 22 June 2000 regarding its draft decision.  The ACCC has also called for submissions from interested parties on its decision.  Submissions are due by 14 July.  The ACCC will consider the issues raised at the public forum and submissions from interested parties before making a final decision.