Australian Energy Regulator (AER) Case Study

See how we supported the Australian Energy Regulator (AER) in shaping the 2022 Rate of Return Instrument for electricity and gas networks. Through expert WACC cross checks and comprehensive financeability assessments, our work played a pivotal role in delivering robust, defensible decisions for Australia’s energy sector.

What they Needed

The Australian Energy Regulator (AER) required expert guidance to ensure the robustness and defensibility of its 2022 Rate of Return Instrument, a critical framework for determining returns for electricity and gas networks. They needed in-depth analysis to validate key financial metrics, such as WACC and financeability assessments, and to address stakeholder critiques effectively. The AER sought support to navigate complex regulatory requirements, ensuring decisions were analytically sound, transparent, and aligned with industry expectations.

How we Helped them?

Price Control Financeability & Returns

MCC Economics advised the Australian Energy Regulator (AER) with the development of their Rate of Return Instrument for 2022, which covers electricity and gas distribution and transmission across Australia.​ Our role was primarily in advising the regulator on rate of return considerations, providing analysis and commentary on the impact of varying macroeconomic conditions and parameters of the rate of return instrument.​

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We used the AER’s inflation model to understand the impact of high inflation on the price-control and provided a scenario model to demonstrate to AER’s stakeholders the impact of varying parameters of the rate of return instrument (beta, term, MRP, RFR).​ We led the use of crosschecks for the rate of return, with much of this analysis being included in chapters authored by the MCC team in the Draft Decision and Final Decision.​ We also analysed stakeholder responses during the early stages of engagement with service providers, focussed on these areas of interest.​

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I was delighted that MCC's work was completed on time, and within budget, helping us deliver important changes and improvements, to the benefit of our stakeholders. ​ MCC's report is published on the CCC website.

- Bea Natzler
Team Leader at Climate Change Committee, UK

I am delighted to recommend MCC Economics. Specifically, I worked closely with PJ, who helped us with our Nuclear and CCUS projects. PJ helped us develop new policies and answer questions from our stakeholders. ​​His support helped us deliver important changes and improvements, to the benefit of our stakeholders.

- Gordon Hutcheson ​
Head of Nuclear Policy at Ofgem, UK

MCC Economics has helped us better understand the most important issues for our stakeholders, including: charges, shareholder returns, debt payments and inflation impacts.

- Leila N. Nasr
Section Head at Department of Energy, Abu Dhabi

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