ResponsetotheIndustryPanel’srequestforfurtherinformation:Question6

HowisthecostofcarboncurrentlyaccountedforinACTEW’sexpenditureforecasts?Isanydownwardadjustmenttoexpenditureforecastsproposednowthatthecarbontaxhasbeenabolished?Ifso,whatsortofadjustmentiscontended for?

ACTEWresponse

A smallproportion ofthetotalexpenditureforecast includes thecost ofcarbon.ACTEW estimates thatthemaximum impact ofcarbon on forecastelectricitycosts is on averageless than$20,000peryearandconsiders that chemical costs wouldbeofa similarorder.

ACTEWhas applied theforecast expenditure consistent with theICRC’s decision,as theexpenditureforecasting approach is to,as faras practicable,useinformation that was availabletotheICRCat thetimeofits decision in June2013.

Forecast methodology

No carbon costs wereincluded in operating expenditurethrough thebaseyear(which used 2010-11expenditure–priorto theintroduction ofthecarbon tax-escalated byCPI)and no carbon cost stepchanges wereincluded.

However, a smallamount ofcarbon costs havebeen included in thetotalexpenditureforecast throughtheapplication ofelectricityand chemical costs toestimate2012/13costs. Theescalators themselves didnot apply a cost increase dueto theintroduction ofthecarbon tax. Carbon costs wereincluded asescalators wereapplied to 2012/13 electricityand chemical costs,which included anelement ofcarbon as thecarbon taxapplied from1July2012.

Electricity costs

ACTEWhas estimated the impact from thecarbon priceon electricitycosts intheICRC’s finaldecision asshown in Table1.

Table.1Contribution tooperating expenditureofelectricityescalators

Year / Maximumdifference attributable to carbon taxincluded inthe ICRC’sfinal decision
2013/14 / $5,519
2014/15 / $34,941
2015/16 / $11,327
2016/17 / $16,061
2017/18 / $15,230

ACTEWnotes that whilecarbon increasedelectricitycosts in2012/13,this was offset byreducedenergyusagethrough theuseofdrawing waterfrom Bendoradam and theconsequent avoidanceofpumpingcosts from Googong dam. This provideda lowercost baseand consequentlya lowercontribution tooperating expenditureinthefollowing years.

Theeffectiveelectricity amount included intheexpenditureforecasts for 2013/14isaround$4.6million.Although this amount includes carbon it is less than actualelectricitycosts ofabout$5.1 million,ofwhicharound $0.75 millionis estimated to bedueto carbon.

ChemicalCosts

ACTEW’s chemical suppliersdidnot separatelydisclosethecarbon taxintheirpricesso ACTEWisunsureoftheextent towhich chemicalcosts in 2012/13can be attributed to thecarbontax.ACTEW’s revisedsubmission did not includeanyotherchemicalcosts dueto thecarbon tax.

Given that chemical costs in2012/13aresimilarto that ofelectricity($4.19m and$4.59mrespectively)ACTEWconsiders that theimpact ofcarbonon operating expenditure,through thechemical escalators,isof a similarmagnitudeto theelectricitycarboncosts shown in Table1.