Application Martin No: gr9902 Jones Contents
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- Bu səhifədəki naviqasiya:
- Financial indicator analysis
- Annexure 1 Submissions received by Commission in response to Issues Paper (6 September 1999)
- Interest Abbreviation Date of Document
- Submissions received by Commission in response to Draft Decision (16 August 2000)
- Submissions received by Commission in response to Issues Paper (25 May 2001)
- Public version of Annexure 2 Assessment of stranding risk for the MAPS
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Source: MAPS access arrangement information, p. 17. Commission’s Draft Decision The Commission stated in the Draft Decision that it recognises the limitations of KPI information noted by Epic, but considers the information can still provide a useful guide in benchmarking operating performance across pipelines. The Commission welcomes Epic’s contribution to the available body of benchmarking information, and its views on the importance of service standard comparisons. The issue of service standards is discussed in some detail in the Commission’s Draft Regulatory Principles.492 Submissions received in response to the Commission’s ‘Regulation of Transmission Revenues’ Issues Paper493 revealed support for explicit service standards to be developed, although there is less consensus on how to actually determine appropriate service standards and at what level or levels service standards should be set. The Commission does have concerns about undertaking what could be seen as ‘technical regulation’ rather than economic regulation, and does not consider it appropriate for it to solely determine the service standards that must apply to service providers, either individually or collectively. However, it is the Commission’s preference that all interested parties have the opportunity to provide input to any service standards proposed by a service provider to apply for the duration of the regulatory period. In addition to the KPI information provided by Epic, the Commission considered cost per pipeline length. This is a well-known industry-accepted benchmark for operating and maintenance costs. This indicator was compared across several pipelines and the results are summarised in Table 2.16 of this Final Decision. The relatively high figure shown for the MAPS is to some extent (as TGT submitted) associated with Epic’s comparatively large number of compressor stations. Therefore, the Commission considered forecast operating costs as a percentage of overall capital costs employed.494 As noted in section 2.6.4, this result typically ranges from 2 per cent for an uncompressed pipeline to 5 per cent for a fully compressed pipeline. In Epic’s case forecast operating costs are approximately 2.5 per cent of the ORC value calculated by the Commission. Overall, the Commission considers Epic’s operating costs to be within acceptable limits. However, the Commission will consider whether the level of operating costs continues to be appropriate at the commencement of the next regulatory review. Financial indicator analysis The Commission stated in the Draft Regulatory Principles that financial indicator analysis can provide the Commission with a means of assessing the likely impact of its decisions on the financial standing of regulated business.495 That is, it can provide a useful check on the reasonableness of its regulatory decisions. Financial indicators developed by credit rating agencies for analysing company financial risk include:
Other financial indicators are also used to assist in analysing company profitability, cash flow protection and capital structure. For such analysis to be effective, the Commission would require:
The Commission has not at this stage undertaken an analysis of the likely impact of this Final Decision on Epic’s financial indicators. Epic’s revenues over the access arrangement period are determined almost entirely by existing contracts. Therefore, the Commission considers that the Final Decision will have very little impact on Epic’s financial indicators. In the Draft Decision the Commission invited submissions from Epic and other interested parties, as to whether the Commission should consider undertaking this analysis prior to the release of the Final Decision. There were no submissions on this matter. Final decision Pursuant to section 2.16(b)(ii) of the Code, the Commission does not approve in its present form Epic’s proposed access arrangement for the Moomba to Adelaide Pipeline System. Pursuant to section 2.16(b)(ii) of the Code, the Commission requires Epic to resubmit a revised access arrangement by 30 November 2001. The amendments (or, as appropriate, the nature of amendments) that would have to be made in order for the Commission to approve the proposed access arrangement are recorded in this Final Decision. As stated in chapter 1, this document sets out the Commission’s Final Decision on the revised access arrangement (version 29 June 2001). It does not address those provisions of the original access arrangement that have since been superseded or withdrawn. Australian Competition and Consumer Commission Annexure 1 Submissions received by Commission in response to Issues Paper (6 September 1999) Note: In some cases, additional information has been provided to the Commission on a confidential basis.
Submissions received by Commission in response to Draft Decision (16 August 2000) Note: In some cases, additional information has been provided to the Commission on a confidential basis.
Submissions received by Commission in response to Issues Paper (25 May 2001) Note: In some cases, additional information has been provided to the Commission on a confidential basis.
Public version of Annexure 2 Assessment of stranding risk for the MAPS The content of the substantive annexure is confidential to Epic Energy South Australia Pty Limited. _________________ 1 South Australia acted as lead legislator for the national gas access legislation. The Commission is also regulator and arbitrator with respect to transmission pipelines in the other States and Territories with the exception of Western Australia. 2 access arrangement, clause 38.1. 3 Access arrangement information, p. 10. 4 Access arrangement information, p. 23. 5 Access arrangement information, pp. 11, 23. 6 Refer access arrangement information, p. 30. The dollar values quoted here are directly from the document lodged by Epic on 1 April 1999, without adjustment for change in the general level of prices since then. Adjustments of this nature are made later in this chapter. 7 While Epic stated this value in the access arrangement information at pp. 11-12 and 30 of the access arrangement information, Epic in fact reduced the amount to $570.1m by taking out amounts budgeted for expenditure on gas quality monitoring and remote valves in a later year. 8 Epic letter to Commission, 11 April 2000. 9 Epic letter to Commission, 11 April 2000. 10 Connell Wagner, Final Report, April 2000, p. 5. 11 Santos submission, 18 September 2000, p. 4. 12 SA Government, 8 September 2000, p. 10. 13 Ibid, p. 11 14 AGUG submission, 21 September 2000, p. 2. 15 Ibid, p. 1. 16 Ibid, p. 2. 17 Epic’s response to Draft Decision, 10 October 2000, Part A, p. 7. 18 Epic’s response to Draft Decision, 10 October 2000, Part A, Appendix 1 19 Epic response to Draft Decision, 10 October 2000, Part A, p. 4. 20 Epic response to Draft Decision, 10 October 2000, Part C, p. 9. 21 Ibid, p. 8. 22 Ibid 23 Ibid, p. 9. MicroAlloying International: Report on Pricing of High Strength Linepipe; 7 December 2000, p. 6. 24 Venton & Associates; letter dated 12 October 2000 and Worley Limited; letter dated 27 September 2000 25 MAPS Access arrangement information, Attachment 2 (September 1988, revised March 1999). 26 As at 30 June 2001. 27 Epic has not changed its preference for Option B. 28 Epic and its consultants (Venton & Associates; and Worley Limited) appear to have interpreted the base construction rate used by the Commission in its Draft Decision estimate incorrectly. In the Commission’s model for estimating construction costs a so-called base construction rate is multiplied by factors that take into account assumed location and trench conditions. In this instance the average rate used was 30% above the base rate. This average rate ($306/km.mm) is identical to the rate for construction costs quoted by Venton for Epic’s Ballera-Wallumbilla pipeline, completed in 1996. The Commission has adopted the Ballera-Wallumbilla average rate with appropriate adjustment to account for inflation. 29 For example, based on the study by MicroAlloying International, X70 pipe in the size range required can be landed in NSW for $A1,053/tonne. Based on the pipe’s origin (Southern Europe) it has been assumed that the landed price in SA would be the same. In the Commission’s estimate of pipe cost, an average price for delivery of pipe to site of approximately $80/tonne has been added to this base cost. 30 A third compressor unit has been included at Station 5 to enhance system backup. 31 No adjustment for inflation was made in the estimate for the Draft Decision. 32 Interest on capital has been determined by assuming a linear expenditure profile of the total capital over an assumed construction period of 18 months. The interest rate used is consistent with the Commission’s CAPM assumptions. 33 Sinclair Knight Merz Review of the Commission’s ORC costing of the Moomba to Adelaide gas pipeline, 29 August 2001, p.5. 34 The Commission notes that the average expired life of each asset class as used in formulating this Final Decision is exclusive of the expansion undertaken for National Power (now Pelican Point Power). The Commission would expect the average expired life of some asset classes to be reduced marginally by the inclusion of the Pelican Point Power expansion. Consequently, the Commission wrote to Epic on 10 August 2001 requesting revised data. Epic declined to provide further information. 35 ACCC, MAPS Draft Decision, 16 August 2000, p. 31. 36 Access arrangement information, p. 12 and Epic, consolidated response to Commission letter of 30 April 1999, p. 1. The Commission invited Epic to clarify the figure for book value by reference to other accounting information. No further information has been received. 37 Epic, consolidated response to Commission letter of 30 April 1999, p. 6. 38 Epic has provided the Commission with the purchase price adjusted for non-MAPS assets on a confidential basis. 39 ACCC, Draft Statement of Principles for the Regulation of Transmission Revenues, 27 May 1999. 40 Pursuant to section 8.19, the part of the investment that is of a speculative nature is to be held in a speculative investment fund and may be added to the asset base at a later date when it meets the section 8.16 criteria. 41 Refer Epic access arrangement information, p. 12 and revised proposed access arrangement, 2 March 2000, clause 10.5(d). 42 Access arrangement information, p. 12, as modified by consolidated response to ACCC letter of 30 April 1999. 43 Access arrangement, clause 5.2(a)(v). 44 Access arrangement information, p. 19. 45 Access arrangement information, p. 19. 46 Access arrangement information, pp. 12, 19. 47 Ohio PUC, Re Columbus Southern Power Co, 1992 133 PUR4th 525, 550, quoted by EAPL in Access Arrangement Information, 5 May 1999, p. 28. 48 Epic response to Draft Decision, part A, p. 9. 49 Epic response to Draft Decision, part A, p. 9. 50 Letter from Epic to the ACCC of 23 August 2001, Attachment 1. 51 Access arrangement information, p. 31. 52 Acess arrangement information, pp. 31 and 34. 53 Access arrangement information, p. 31. 54 Access arrangement information, p. 34. 55 The Commission has used financial market data as at 8 August 2000 to determine the WACC in the Draft Decision. This will be updated for the most recent market data available at the time of this Final Decision. 56 See pages 56-59 of the Commission’s Final Decision on Victorian Access Arrangements 57 Letter from Hon Wayne Matthew MP to ACCC, 8 September 2000, p. 2. 58 Letter from Hon Wayne Matthew MP to ACCC, 8 September 2000, p. 2. 59 SA Government submission, 8 September 2000, p. 5. 60 AGUG submission, 21 September 2000, p. 4. 61 AGUG submission, 21 September 2000, p. 4. 62 Mr D Williams, Transcript, ACCC Pre-decision consultation forum, 2 November 2000, p. 10. 63 Mr C Fong, Transcript, ACCC Pre-decision consultation forum, 2 November 2000, p. 11. 64 Mr R Domanski, Transcript, ACCC Pre-decision consultation forum, 2 November 2000, p. 13. 65 Ibid. 66 SAIPAR, Draft Decision for the South Australian Distribution Systems 13 April 2000. 67 Epic response to Draft Decision, part A, p. 4. 68 Ibid, p. 10. 69 Ibid, p. 11. 70 ACCC, Access arrangements proposed by Transmission Pipelines Australia Pty Ltd and others, Final Decision, 6 October 1998, p. 51. 71 NERA, A critique of the WACC parameters proposed for Transgrid – a report for the Commission, March 1999, p. 9. 72 Access arrangement information, p. 33. 73 ORG, Electricity Distribution Price Determination 2001-2005, Vol 1, September 2000, p. 301 74 Ibid, p. 298. 75 IPART, Final Decision, Access Arrangement for AGL Gas Networks Ltd – Natural Gas System in NSW, July 2000, p. 65. 76 Professor Kevin Davis’s comments presented in The Weighted Cost of Capital for the Gas Industry – A report commissioned by the ACCC and prepared by Professor Davis of the University of Melbourne (March 1998). 77 ACCC, Access arrangements proposed by Transmission Pipelines Australia Pty Ltd and others, Final Decision, 6 October 1998, p. 53. 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