Western Australian Current Regulations

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NATIONAL THIRD PARTY ACCESS CODE FOR NATURAL GAS PIPELINE SYSTEMS - REG 8.4

8.4         Total Revenue

                The Total Revenue (a portion of which will be recovered from sales of Reference Services) should be calculated according to one of the following methodologies:

                Cost of Service : The Total Revenue is equal to the cost of providing all Services (some of which may be the forecast of such costs), and with this cost to be calculated on the basis of:

            (a)         a return ( Rate of Return ) on the value of the capital assets that form the Covered Pipeline or are otherwise used to provide Services ( Capital Base );

            (b)         depreciation of the Capital Base ( Depreciation ); and

            (c)         the operating, maintenance and other non-capital costs incurred in providing all Services ( Non-Capital Costs ).

                IRR : The Total Revenue will provide a forecast Internal Rate of Return (IRR) for the Covered Pipeline that is consistent with the principles in sections 8.30 and 8.31. The IRR should be calculated on the basis of a forecast of all costs to be incurred in providing such Services (including capital costs) during the Access Arrangement Period.

                The initial value of the Covered Pipeline in the IRR calculation is to be given by the Capital Base at the commencement of the Access Arrangement Period and the assumed residual value of the Covered Pipeline at the end of the Access Arrangement Period (Residual Value) should be calculated consistently with the principles in this section 8.

                NPV : The Total Revenue will provide a forecast Net Present Value (NPV) for the Covered Pipeline equal to zero. The NPV should be calculated on the basis of a forecast of all costs to be incurred in providing such Services (including capital costs) during the Access Arrangement Period, and using a discount rate that would provide the Service Provider with a return consistent with the principles in sections 8.30 and 8.31.

                The initial value of the Covered Pipeline in the NPV calculation is to be given by the Capital Base at the commencement of the Access Arrangement Period and the assumed Residual Value at the end of the Access Arrangement Period should be calculated consistently with the principles in this section 8.

                The methodology used to calculate the Cost of Service, an IRR or NPV should be in accordance with generally accepted industry practice.

                However, the methodology used to calculate the Cost of Service, an IRR or NPV may also allow the Service Provider to retain some or all of the benefits arising from efficiency gains under an Incentive Mechanism. The amount of the benefit will be determined by the Relevant Regulator in the range of between 100% and 0% of the total efficiency gains achieved.

        [Section 8.4 amended: Gazette 23 January 2002 p. 439; 2 May 2003 p. 1524 and 1527.]



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