Special Reviews
Financeability Tests

Review of financeability test 2018

Status
Consultation
Start Date
Apr 2018
End Date
Nov 2018
23
Days left for submissions
Deadline: 7 Sep 2018
Have your say
What

We have released our Draft Report on the review of the financeability test we generally use as part of our building block approach in price regulation decisions.

While stakeholder feedback to our Issues Paper confirmed that our 2013 financeability test is working well overall, we have made changes to:

  • broaden the test by calculating financeability tests for both the benchmark and actual business
  • assume a real cost of debt in the financeability test
  • adjust the target ratios (benchmark values) we use to assess financeability
  • clarify the process to identify and remedy any financeability concerns, and
  • allow flexibility in making cash flow adjustments beyond one regulatory period, if necessary.

We discuss our reasoning for making these decisions in our Draft Report.

Why

We use the financeability test to assess the impact of our pricing decisions on the short-term financeability of regulated businesses. We last reviewed our financeability test in 2013, and made small changes in early 2015.

Overall, we think our current test is working well. However, we will make improvements that are feasible and likely to deliver a clear net benefit.

Who

In general, we apply our financeability test when we use our building block approach in determining revenue and prices for regulated businesses. This includes the regulated water utilities and some businesses in other industries.

How

Our Draft Report explains our draft decisions on how we propose to conduct our financeability test going forward.

Stakeholders now have the opportunity to comment on our Draft Report and draft decisions.

We will consider all stakeholder feedback and undertake our own analysis before making our final decisions. We will release our Final Report and decisions in November 2018.

When

Our 2018 financeability test will apply to pricing decisions that take effect on or after 1 July 2019.

What next

On 7 August 2018 we released our Draft Report for our review of our financeability test. We invite interested parties to make written submissions in response to our Draft Report by Friday 7 September 2018.

Key Contact
Anthony Rush
Email
02 9113 7790
Have Your Say
IPART routinely seeks public input into our reviews via submissions, public hearings, stakeholder workshops and community surveys.
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