Long Term Revenue Constraint Methodology 2014-15 30 Oct 2015

On 30 October 2015, NBN Co submitted to the ACCC a set of regulatory information for 2014-15 as required under Schedule 1F of NBN Co’s SAU.

Long Term Revenue Constraint Methodology 2014-15

Under Schedule 1E.1.2 of the SAU, the ACCC must publish an annual Long Term Revenue Constraint Methodology (LTRCM) determination in respect of the Annual Building Block Revenue Requirement (ABBRR), the Regulatory Asset Base (RAB) and the Initial Cost Recovery Account (ICRA) for the Initial Regulatory Period.

In making its determination, the ACCC will assess whether NBN Co has complied with the relevant criteria, including prudency criteria, set out in the SAU.

The regulatory information submitted by NBN Co includes information about its compliance with the price controls set out in the SAU.

Public versions of NBN Co’s regulatory information reports

ACCC preliminary view

On 22 December 2015, the ACCC formed a preliminary view in relation to the capital and operating expenditure amount proposed by NBN Co in its 2014–15 LTRCM proposal under clause 1E.1.2(c)(vii) of the SAU.

The ACCC’s preliminary view is that it does not intend to determine a substitute amount of Capital Expenditure in accordance with clause 1D.3.2(d) of the SAU or a substitute amount of Operating Expenditure in accordance with clause 1E.8.2(c) of the SAU.

The letter to NBN Co setting out the ACCC’s preliminary view

LTRCM draft determination

On 15 March 2016, the ACCC published an LTRCM Draft Determination for the 2014-15 financial year, in accordance with Schedule 1E.1.2 of the SAU.

The ACCC’s draft decision is that the regulatory information submitted by NBN Co under Schedule 1F of the SAU for the 2014-15 financial year satisfies the requirements set out in the SAU. The ACCC proposes to accept NBN Co’s proposed values (and inputs to the values) for the Annual Building Block Revenue Requirement (ABBRR), Regulatory Asset Base and the Initial Cost Recovery Account (ICRA).

In its 2014-15 LTRCM submission, NBN Co also requested an amendment to the ACCC’s 2013-14 LTRCM Determination to correct for an inadvertent omission in NBN Co’s regulatory information. The amendment would result in an adjustment to the ABBRR and ICRA values in the 2013-14 LTRCM Determination, and would subsequently impact the values in the ACCC 2014-15 LTRCM Determination. The ACCC will consider NBN Co’s proposed amendment as part this LTRCM consultation process. The ACCC is of the preliminary view that it will accept NBN Co’s proposed amendment for the reasons discussed in the report.

The ACCC invites interested parties to make submissions on this draft determination and the ACCC’s preliminary view to accept NBN Co’s proposed amendment to the 2013-14 LTRCM Determination. Submissions were due on Friday 15 April 2016.

Submissions to the LTRCM determination

Submissions to the draft determination closed on 15 April 2016. The ACCC did not receive any submissions in response to its draft determination.

LTRCM final determination

On 3 June 2016, the ACCC published its final determination on NBN Co’s LTRCM and price compliance for the 2014-15 financial year.

The ACCC has accepted NBN Co’s proposed values (and the inputs to these values) for the Annual Building Block Revenue Requirement, Regulatory Asset Base and Initial Cost Recovery Account in accordance with clause 1E.1.2 of NBN Co’s SAU. The ACCC is also satisfied that NBN Co’s prices for 2014-15 did not exceed the maximum regulated prices as set out in the SAU.

As noted in the draft decision, the ACCC has considered an amendment to the 2013-14 LTRCM final determination as part of this LTRCM consultation process. Having assessed NBN Co’s proposed amendment against the relevant provisions in the SAU, the ACCC has decided to accept the amendment to the 2013-14 LTRCM determination. The amended values and reasons for the ACCC’s decision are set out in the 2014-15 LTRCM final determination.