For Western Australia’s regulated gas pipelines, the ERA determines an allowed rate of return on service providers’ projected capital bases as part of setting regulated revenues for an access arrangement.
The National Gas Law requires the ERA to produce a gas rate of return instrument setting out how the ERA and regulated entities will calculate the rate of return for the duration of the instrument.
The ERA published a gas rate of return instrument on 18 December 2018 that set out the ERA’s position at that time on determining the allowed rate of return on capital.
The ERA is required to review the current gas instrument and replace it by the fourth anniversary of when the current instrument was published, which will be December 2022. The 2022 gas instrument will then be used to determine the rate of return for gas service providers’ future access arrangements.
The ERA must fulfil certain consultation requirements to develop the 2022 gas instrument. These include considering the advice, recommendations and/or submissions given by a Consumer Reference Group and Independent Panel.
Report on the term for the cost of equity
The ERA has published a report by Dr Martin Lally on the term for the cost of equity. The report details the term for the allowed cost of equity and reviews submissions that the ERA has received on this matter.
The ERA conducted a focused consultation for the 2022 gas instrument review in April and May 2022. The focused consultation addressed specific questions regarding equity beta and the market risk premium. The ERA published a discussion paper outlining these questions and relevant background to these questions on 4 April 2022. The ERA also conducted an online session with interested stakeholders on 27 April 2022, where the ERA presented its underlying analysis and asked questions. The ERA invited stakeholders to make written submissions for the focused consultation. Submissions closed 9 May 2022, at which time the focused consultation concluded.
Report on debt-raising and debt-hedging costs
The ERA has published a report by Chairmont Consulting (Chairmont) on debt-raising and debt-hedging costs, which are the administrative costs and other charges incurred by businesses when obtaining and hedging debt finance. The ERA invited interested parties to provide submissions on the Chairmont report.
Public submissions received in response to Discussion paper
On 8 December 2021, the ERA published a discussion paper outlining its working views on the method for calculating the allowed rate of return on capital for service providers for the 2022 gas instrument.
Engagement process position paper
On 20 July 2021, the ERA published an engagement process position paper detailing its planned approach to fulfilling the consultation requirements for producing the 2022 gas instrument and inviting stakeholder submissions on this process.