(1)  The following principles are prescribed—

(a)  a genuine and appropriate competitive assessment process—

(i)  results in the costs of carrying out an infrastructure project being prudent, efficient and reasonable, and

(ii)  provides incentives to promote economic efficiency, and

(iii)  results in revenue for the ongoing ownership, control and operation of the infrastructure project being commensurate with the regulatory and commercial risks,

(b)  a network operator is entitled to recover the following—

(i)  prudent, efficient and reasonable costs incurred by the network operator in complying with a regulatory requirement,

(ii)  payments required to be made by the network operator to the infrastructure planner under a contractual arrangement, if the network operator was required to enter the contractual arrangement under the relevant authorisation,

(iii)  reasonable costs incurred by the network operator, as assessed by the regulator, if the regulator fails to make a revenue determination within the time period specified in clause 50,

(c)  an appropriate referenced costs process—

(i)  results in the costs of carrying out an infrastructure project being prudent, efficient and reasonable, and

(ii)  provides incentives to promote economic efficiency, and

(iii)  results in revenue for the ongoing ownership, control and operation of the infrastructure project being commensurate with the regulatory and commercial risks.

(2)  The regulator must, when assessing reasonable costs for the purposes of subclause (1)(b)(iii), take into account whether the network operator contributed to the delay.

(3)  In this clause—

regulatory requirement, for a network operator, means a requirement imposed on the network operator by a relevant law but does not include a requirement to pay a fine, penalty or compensation for a breach of a requirement imposed on the network operator by a relevant law.

relevant law means the following—

(a)  the Act or this Regulation,

(b)  the National Electricity (NSW) Law or the National Electricity Rules,

(c)  an Act, including an instrument made under that Act, that—

(i)  imposes a tax or levy, or

(ii)  relates to the protection of the environment, or

(iii)  regulates the use of land, or

(iv)  otherwise materially affects the carrying out of the infrastructure project by the network operator.

(1)  The regulator must—

(a)  prepare guidelines setting out how the regulator will exercise functions under the Act, Part 5, and

(b)  publish the regulator’s guidelines on the regulator’s website.

(2)  The regulator’s guidelines must be consistent with the Act and this Regulation.

(3)  Different regulator’s guidelines may be made for contestable revenue determinations and non-contestable revenue determinations.

(1)  This clause applies to regulator’s guidelines for non-contestable revenue determinations.

(2)  The regulator must make a non-contestable revenue determination in accordance with the regulator’s guidelines for non-contestable revenue determinations.

(3)  The regulator must—

(a)  ensure the regulator’s guidelines set out how a non-contestable revenue determination will be made by the regulator, including how the regulator will make a determination under clause 47E(4) for a contestable augmentation, and

(b)  as far as is reasonably practicable, make the regulator’s guidelines consistent with the National Electricity Rules, Chapter 6A as that Chapter applies to the AER making a transmission determination.

(4)  The regulator’s guidelines for non-contestable revenue determinations must deal with matters set out in the National Electricity Rules, Chapter 6A, including the following—

(a)  the building blocks approach,

(b)  the regulatory asset base,

(c)  return on capital,

(d)  depreciation,

(e)  the estimated cost of corporate income tax,

(f)  forecast operating expenditure,

(g)  forecast capital expenditure,

(h)  reopening of a revenue determination for capital expenditure,

(i)  network support pass through,

(j)  cost pass through.

(5)  The regulator’s guidelines for non-contestable revenue determinations must not deal with the following matters under the National Electricity Rules, Chapter 6A—

(a)  pricing,

(b)  benchmarking reports,

(c)  ring-fencing arrangements,

(d)  shared assets,

(e)  the X-factor,

(f)  small-scale incentive schemes,

(g)  demand management innovation allowance mechanism,

(h)  contingent projects,

(i)  transmission consultation procedure,

(j)  removal of assets from the regulatory asset base.

(6)  The regulator’s guidelines for non-contestable revenue determinations must set out how the regulator must—

(a)  apply the regulator’s guidelines for contestable revenue determinations to a contestable component of a revenue determination in relation to which the regulator is satisfied the competitive assessment process was genuine and appropriate, and

(b)  apply the regulator’s guidelines for non-contestable revenue determinations to a contestable component of a revenue determination in relation to which the regulator is not satisfied the competitive assessment process was genuine and appropriate.

(1)  The regulator’s guidelines for non-contestable revenue determinations must include the schemes and models to be used by the regulator in making a non-contestable revenue determination, including the following—

(a)  an efficiency benefit sharing scheme,

(b)  a capital expenditure sharing scheme,

(c)  a post-tax revenue model,

(d)  a roll forward model.

(1A)  The regulator’s guidelines for non-contestable revenue determinations must provide that the schemes specified in subclause (1)(a) and (b) do not apply to a contestable component of a non-contestable revenue determination.

(2)  The regulator’s guidelines for non-contestable revenue determinations must also include a service target performance incentive scheme to be used by the regulator in remaking a non-contestable revenue determination under the Act, section 40.

(3)  The schemes and models included in the regulator’s guidelines under this clause must be consistent with the equivalent schemes and models under the National Electricity Rules, Chapter 6A.

(1)  Before amending the regulator’s guidelines, the regulator must—

(a)  publish the proposed amendment on the regulator’s website for a period of at least 20 business days, and

(b)  consider any submissions received within the period.

(2)  Subclause (1) does not apply to—

(a)  the first publication of the regulator’s guidelines under clause 47(1)(b), or

(b)  an amendment the regulator considers minor or administrative.

(3)  This clause extends to an amendment of a scheme or model included in the regulator’s guidelines.

(1)  This clause applies to the making of a non-contestable revenue determination.

(2)  Before determining the amount for the component under the Act, section 38(2)(a), the regulator must calculate the depreciation using the depreciation schedules prepared in accordance with the National Electricity Rules, Chapter 6A.

(3)  The regulator must modify the depreciation schedules for the purposes of subclause (2) if satisfied that it is reasonably necessary to ensure—

(a)  the revenue determination is consistent with the objects of the Act specified in the Act, section 3(1)(a)–(c), and

(b)  the network operator is capable of efficiently obtaining finance to carry out the infrastructure project.

(4)  When determining the amount for the component under the Act, section 38(2)(b), the regulator must apply the current rate of return instrument made by the AER under the National Electricity (NSW) Law, section 18I, as in force at the time of the revenue determination.

(5)  The regulator must take into account contractual arrangements entered into by a network operator as required under a relevant authorisation for a previous contestable revenue determination if—

(a)  the regulator is establishing the value of the regulatory asset base for the purposes of a non-contestable revenue determination, and

(b)  a contestable revenue determination was previously made in relation to all or part of the same network infrastructure.

(1)  The regulator must determine the amount for the components under the Act, section 38(2) for a revenue determination for a contestable augmentation in accordance with this clause.

(2)  The regulator must determine the amount for the component in accordance with the regulator’s guidelines for contestable revenue determinations if—

(a)  the costs of the component are derived as a result of a competitive assessment process, and

(b)  the regulator is satisfied the competitive assessment process was genuine and appropriate.

(3)  The regulator must determine the amount for the component by relying on and adopting information provided by the network operator or infrastructure planner if—

(a)  subclause (2) does not apply to the component, and

(b)  the regulator is satisfied—

(i)  the existing contractual arrangements contain an appropriate referenced costs process, and

(ii)  the amount is determined using the appropriate referenced costs process.

(4)  The regulator must determine the amount for a component in accordance with the regulator’s guidelines for non-contestable revenue determinations if subclauses (2) and (3) do not apply to the component.

(5)  The regulator, when making a determination under this clause, must take into account—

(a)  the existing contractual arrangements, including incentive regimes in the contractual arrangements, and

(b)  any other contract entered into by the network operator under an authorisation in relation to the contestable augmentation, including incentive regimes in the contract.

(6)  A revenue determination for a contestable augmentation is made after each of the amounts for the components determined under this clause is added to make a single determination.

(7)  In this clause—

appropriate referenced costs process means a mechanism in an existing contractual arrangement that the regulator is satisfied is appropriate for wholly or partially determining the amount for a component under a contestable augmentation.

(1)  A network operator must give the regulator the information about the proposed amounts payable to the network operator for carrying out an infrastructure project that the regulator reasonably requires to exercise the regulator’s functions under the Act, Part 5.

(1A)  A network operator who is subject to an authorisation for a contestable augmentation must give the regulator the following information that the regulator reasonably requires to exercise the regulator’s functions under the Act, Part 5—

(a)  information about and obtained from a competitive assessment process,

(b)  information relevant to determining an amount under clause 47E(3).

(2)  The information must be given before a revenue determination is made in relation to the network operator.

(3)  The network operator must prepare the information in accordance with—

(a)  the guidelines published by the regulator about the transmission efficiency test, and

(b)  the guidelines published by the regulator under clause 47, and

(c)  other requirements notified by the regulator to the network operator.

(4)  The regulator must take into account the information given by the network operator when—

(a)  calculating the transmission efficiency test, and

(b)  making a revenue determination

(1)  The regulator must consult the infrastructure planner before making a revenue determination.

(1A)  If the revenue determination relates to a REZ network infrastructure project, the regulator must also consult with the consumer trustee.

(2)  The infrastructure planner must give the regulator all information about an infrastructure project that the regulator considers necessary to make the revenue determination, including—

(a)  information about or obtained from a competitive assessment process, or

(b)  information relevant to determining an amount under clause 47E(3).

(3)  The consumer trustee must give the regulator information about the amount notified to the regulator under the Act, section 31(2) that the regulator considers necessary to make the revenue determination.

(1)  The regulator must make a revenue determination in relation to a network operator within the following period after the regulator has received the information from the network operator required by clause 48—

(a)  for a contestable revenue determination—42 business days,

(a1)  for a revenue determination for a contestable augmentation—84 business days,

(b)  otherwise—126 business days.

(2)  The regulator may, by written notice to the network operator, extend the time period under subclause (1)(a) by a further 42 business days if the regulator is satisfied that the extension is reasonably necessary because—

(a)  the revenue determination is complex, and

(b)  some of the information from the network operator was obtained other than from a competitive assessment process.

(2A)  The regulator may, by written notice to the network operator, extend the time period under subclause (1)(a1) by a further 42 business days if the regulator is satisfied the extension is reasonably necessary because—

(a)  the revenue determination is complex, and

(b)  the regulator has been unable to satisfy itself of one or more of the matters specified in clause 47E(2)(b) or (3)(b).

(3)  As soon as practicable after the regulator fails to make a revenue determination within the period required by this clause, the regulator must—

(a)  prepare a report that specifies—

(i)  the reasons for the failure, and

(ii)  the date by which the regulator expects to make the revenue determination, and

(b)  give the report to the Minister, and

(c)  publish the report on the regulator’s website.

Allowances for the following are prescribed as components of a non-contestable revenue determination—

(a)  indexation of the regulatory asset base,

(b)  the estimated cost of corporate income tax of the network operator,

(c)  an increase or decrease in the network operator’s revenue resulting from the operation of the schemes included in the regulator’s guidelines under clause 47B(1)(a) and (b) and (2),

(d)  repayment of prudent, efficient and reasonable capital costs not included in the component specified in the Act, section 38(2)(a),

(e)  other risks for which the network operator is not already compensated under the component specified in the Act, section 38(2)(b).

(1)  A revenue determination may include provision for the adjustment of any amount included in the revenue determination, whether or not the amount relates to a capital cost.

(2)  A provision in a revenue determination for adjustment may specify the following—

(a)  that a particular adjustment must be carried out at particular times or in particular circumstances,

(b)  that a particular adjustment may or may not require the revenue determination to be reviewed and remade.

Example—

 An adjustment may be made for inflation without a review or remake of the revenue determination. The occurrence of a significant event may require the revenue determination to be reviewed and remade.

(3)  All adjustments, whether or not the revenue determination is reviewed and remade, must be carried out in accordance with—

(a)  the guidelines issued under clause 47, and

(b)  for a contestable revenue determination or a contestable component of a non-contestable revenue determination—the contractual arrangements the network operator entered into as required under the relevant authorisation, and

(c)  for a revenue determination for a contestable augmentation—

(i)  the existing contractual arrangements, and

(ii)  for an amount determined under clause 47E(2)—another contract entered into by the network operator if—

(A)  the contract is entered into under an authorisation in relation to the contestable augmentation, and

(B)  the regulator is satisfied the contract was made following a genuine and appropriate competitive assessment process, and

(iii)  for an amount determined under clause 47E(3)—adjustments set out in an appropriate referenced costs process.

(4)  In reviewing and remaking a determination for the purposes of adjustment, the regulator may adopt, without recalculation, the existing capital costs calculated using the transmission efficiency test for the previous determination.

(5)  A revenue determination may include provision for adjustment that is to be carried out in relation to the termination or expiry of the contractual arrangements entered into by the network operator under the relevant authorisation.

(1)  A revenue determination must include a schedule of the amounts required to be paid to the network operator.

(2)  The schedule must—

(a)  set out each amount required to be paid and the date on which the amount must be paid, and

(b)  for a contestable revenue determination—correspond with the term of the contractual arrangements that the network operator enters as required under the relevant authorisation, and

(c)  for a non-contestable revenue determination—set out the amounts required to be paid for the following 5 years, and

(d)  for a revenue determination for a contestable augmentation—correspond with the term of the existing contractual arrangements.

(3)  A non-contestable revenue determination may also include other information the regulator considers appropriate, taking into account the regulator’s guidelines.

(1)  The regulator must publish the following on its website—

(a)  if a revenue determination is made or remade—

(i)  the revenue determination, and

(ii)  the reasons for making the revenue determination,

(b)  if an adjustment is made to a revenue determination under clause 51 that did not require the revenue determination to be reviewed and remade—an updated schedule of amounts required to be paid to the network operator.

(1A)  Despite clause 52(2)(b) and (d), the schedule required to be published for a contestable revenue determination and a revenue determination for a contestable augmentation must only set out the amounts required to be paid for the following 5 years.

(2)  The revenue determination or schedule must be published as soon as reasonably practicable.

(3)  The regulator must consult with the infrastructure planner before publishing a revenue determination on its website.

(4)  The regulator may decide not to publish part of a revenue determination if satisfied it is not appropriate, taking into account the following—

(a)  the public interest,

(b)  the extent to which publishing the part of the revenue determination would disclose information that is confidential or commercially sensitive,

(c)  the effect of publishing the part of the revenue determination on future competitive assessment processes.

(5)  The regulator may also publish on its website information given to the regulator under clause 48 that relates to—

(a)  a non-contestable revenue determination, or

(b)  a determination under clause 47E(4) for a contestable augmentation.

(6)  The regulator must not publish information under subclause (5) if satisfied that the information is confidential or commercially sensitive.

A revenue determination ceases to have effect if the relevant authorisation ceases to have effect.

Note—

 An authorisation ceases to have effect on the termination or expiry of the contractual arrangements entered into by the network operator under the authorisation. See clauses 19A(4) and 20(3).

(1)  The regulator may review and remake a revenue determination to the extent necessary to correct—

(a)  a material error, misdescription or miscalculation, or

(b)  an error resulting from the provision of false or materially misleading information to the regulator.

(2)  Before reviewing or remaking a revenue determination under subclause (1), the regulator must consult the following—

(a)  the network operator,

(b)  the consumer trustee,

(c)  the infrastructure planner,

(d)  other persons the regulator considers appropriate.

(3)  This clause does not require the regulator to review or remake a revenue determination because of a change to a forecast or assumption relied on by the regulator to make the revenue determination.

In this Division—

eligible network operator means a network operator who—

(a)  is subject to an authorisation under the Act, Part 5, Division 3, and

(b)  is subject to a non-contestable revenue determination, and

(c)  if the network operator is a distribution network service provider—

(i)  is subject to an existing distribution determination under the National Electricity Rules, Chapter 6, and

(ii)  provides distribution services to customers in the NSW region, and

(d)  if the network operator is a transmission network service provider—

(i)  is subject to an existing transmission determination under the National Electricity Rules, Chapter 6A, and

(ii)  provides transmission services to customers in the NSW region.

(1)  The Minister may make a declaration (a cost recovery declaration) that an eligible network operator is entitled to receive a cost recovery amount in relation to specified network infrastructure.

(2)  On the commencement of the declaration—

(a)  the scheme financial vehicle ceases to be required to pay the eligible network operator for the network infrastructure in accordance with a revenue determination by the regulator, and

(b)  the regulator ceases to be required to make revenue determinations, or to review or remake revenue determinations, in relation to the network infrastructure, and

(c)  the eligible network operator is entitled to receive a cost recovery amount for the network infrastructure.

(3)  In this clause—

cost recovery amount, for network infrastructure, means an amount under the National Electricity (NSW) Law that the network operator is entitled to receive for carrying out the network infrastructure project under the authorisation to which the network operator is subject.

(1)  The Minister may make a cost recovery declaration—

(a)  on the Minister’s own initiative, or

(b)  on the application of a relevant person for the declaration.

(2)  Before making a cost recovery declaration, the Minister must consider the following—

(a)  the costs and savings, if the declaration is made, for—

(i)  the eligible network operator to whom the declaration is proposed to apply, and

(ii)  the regulator, and

(iii)  the scheme financial vehicle,

(b)  the impact of the declaration on the financial interests of electricity customers in the NSW region,

(c)  anything else the Minister considers relevant.

(3)  Before making a cost recovery declaration, the Minister must—

(a)  consult with each relevant person for the declaration, and

(b)  get the written consent of the eligible network operator.

(4)  The cost recovery declaration must be published in the Gazette.

(5)  In this clause—

relevant person, for a declaration, means the following—

(a)  the eligible network operator to whom the declaration is proposed to apply,

(b)  the regulator,

(c)  the infrastructure planner,

(d)  the consumer trustee.

(1)  A cost recovery declaration must—

(a)  specify the network infrastructure of the eligible network operator to which the declaration applies, and

(b)  specify whether, for the purposes of the National Electricity Rules, the network infrastructure forms part of—

(i)  the transmission system, or

(ii)  the distribution system, and

(c)  classify, for the purposes of the National Electricity Rules—

(i)  services provided by the eligible network operator in relation to the transmission system as transmission services, and

(ii)  services provided by the eligible network operator in relation to the distribution system as distribution services, and

(d)  further classify, for the purposes of the National Electricity Rules—

(i)  the services classified as transmission services as—

(A)  prescribed common transmission services, or

(B)  prescribed TUOS services, and

(ii)  the services classified as distribution services as direct control services that are standard control services, and

(e)  specify a commencement date for the declaration, which must be a date that is—

(i)  at the start of a regulatory control period for the eligible network operator, and

(ii)  at least 2 years after the date on which the declaration is published in the Gazette.

(2)  In this clause—

regulatory control period has the same meaning as in the National Electricity Rules.