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Powercor Network Tariff Regulation

Powercor's network tariffs are regulated by Victoria's Essential Services Commission and reviewed in detail every five years. The most recent review was completed in 2005 and applies for the years 2006-2010 inclusive.

During this period Powercor is operating under an incentive-based framework where average distribution tariff movements are based on a CPI-X formula. CPI represents annual inflation and X represents an efficiency allowance.

Table 1 presents the X factor for the period 2006 to 2010.

Table 1: X factors applying to Powercor Australia
Year	2006	2007	2008	2009	2010
X	17.3%	2.5%	2.5%	2.5%	2.5%

The sizeable X factor applied in 2006 represents efficiency savings delivered by Powercor in the five years preceding 2006. Tariffs may also be adjusted to factor in changes to licensing fees (L-Factor) and to reward or penalise distributors based on their quality of service (S-Factor).

Movements in individual distribution tariffs are limited to CPI+2, where the maximum they can increase is by inflation plus 2%. This figure is adjusted for licence fees (L-Factor) and service quality (S-Factor).