Final decision for roll forward and post-tax revenue models

The Australian Energy Regulator (AER) published new versions of the roll forward model (RFM) and post-tax revenue model (PTRM) that will apply to future electricity transmission determinations. These models are used to calculate the revenue requirements for a transmission network service provider.

One of the primary changes made includes expanding the roll forward calculations to establish a regulatory asset base that recognises capital expenditure on an as-commissioned basis. A standard approach to roll forward the average remaining asset lives to determine the average remaining asset lives at the end of the regulatory control period has also been inserted.

The AER made further enhancements to the models based on the submission received in response to the proposed amendments published in August 2010.

The RFM is part of the suite of regulatory requirements designed to streamline and improve the quality of economic regulation of energy networks, reduce regulatory costs and enhance regulatory certainty, consistent with the Council of Australian Government’s objectives.

The principal reason for the RFM is to calculate the value of the closing RAB for a regulatory control period by rolling forward the RAB for each regulatory year of a regulatory control period to reflect actual capex and depreciation during that period. The closing RAB value for a regulatory control period as calculated by the RFM becomes the opening RAB to be used for the purposes of making a revenue determination for the next regulatory control period.

The RAB values from the RFM are inputs into the PTRM, where they are rolled forward from one regulatory year to the next regulatory year on a forecast indicative basis and are used in the calculation of the annual building block revenue requirements.