AER Price Controls Course: Australia

Quick Answer

Price Controls 220 is a recorded case study of how the Australian Energy Regulator sets revenues for electricity networks in the National Electricity Market. It explains the building block model, how the weighted average cost of capital is set through the Rate of Return Instrument, how cost forecasts are tested with benchmarking, and how incentive schemes reward efficiency and service.

Key takeaways

The AER sets network revenues with a structured building block model and transparent processes.
The allowed rate of return is set through the Rate of Return Instrument.
Operating and capital cost forecasts are assessed and challenged, with benchmarking used to drive performance.
Incentive schemes such as the EBSS, CESS and STPIS reward efficient spending and good service.

What will you be able to do after the course?

You will be able to explain how an AER revenue determination is built and what drives it. The course is built around three outcomes.

Understand the framework. The AER's role, the timing and structure of its price controls, and its building block model.
Follow the numbers. How the rate of return is set and how operating and capital cost forecasts are assessed.
Read the incentives. How the EBSS, CESS and STPIS work, and how benchmarking supports performance and fair tariffs.

What does the course cover?

The lecture explains the AER's role and how its price controls are timed and structured, then works through each element.

Introduction
The AER's role in economic regulation
Timing and structure of the AER's price controls
Building blocks, rate of return and incentives
The Rate of Return Instrument, opex and capex assessment, benchmarking, and the EBSS, CESS and STPIS

What do the key terms mean?

These are the terms the course uses most, in plain English.

Term	Meaning
Australian Energy Regulator (AER)	The economic regulator for electricity and gas networks in most of Australia, including the National Electricity Market.
National Electricity Market	The interconnected wholesale electricity market and grid covering Australia's eastern and southern states.
Building block model	The method of setting allowed revenue from operating costs, depreciation, a return on the asset base and tax.
Rate of Return Instrument	The AER's binding document setting out how it calculates the allowed weighted average cost of capital.
Efficiency Benefit Sharing Scheme (EBSS)	Lets a network keep the benefit of an operating cost saving for a set period before it passes to customers.
Capital Expenditure Sharing Scheme (CESS)	Shares any underspend or overspend against the capital allowance between the network and its customers.
Service Target Performance Incentive Scheme (STPIS)	Rewards or penalises networks for reliability and customer service against set targets.
Benchmarking	Comparing networks' costs and productivity to test forecasts and drive performance improvement.

Who is the course for?

It suits anyone who wants to understand one of the most structured and performance-focused models for energy networks.

Regulatory economists and electricity market professionals
Network operators, infrastructure investors and engineers
Public finance analysts and pricing advisors
Students and researchers in cost-based and incentive-based regulation

Which courses should you take first?

Price Controls 220 applies the courses on building blocks, the cost of capital, operating costs and incentives to Australia, alongside the British, Irish and Gulf case studies.

Browse every title on the MCC Economics courses page.

Why learn this from MCC Economics?

MCC Economics advises regulators, government bodies and utilities on price controls in the United Kingdom and the Gulf, and its research covers Australian network regulation, including the cost of capital in Australia, New Zealand and Great Britain. The firm was founded in London in 2017. Its regulatory economics work covers energy, water, aviation and infrastructure. You can read the team's background on the people page.

MCC Economics has helped us better understand the most important issues for our stakeholders, including: charges, shareholder returns, debt payments and inflation impacts.

Leila N. Nasr, Section Head, Department of Energy, Abu Dhabi

Questions buyers ask before registering

Who teaches Price Controls 220?

See the instructor profiles near the top of this page for the current teaching team and their experience.

Is there a live session?

No. Price Controls 220 is recorded course material only, so there is no meeting to attend. You get immediate access to the materials once you register.

What do I receive when I register?

A lecture video, slides, a transcript and a quiz.

How does the AER set the rate of return?

Through its Rate of Return Instrument, a binding document that sets out how the weighted average cost of capital is calculated for the networks it regulates.

Which incentive schemes does the course explain?

The Efficiency Benefit Sharing Scheme for operating costs, the Capital Expenditure Sharing Scheme and the Service Target Performance Incentive Scheme.

Should I take the earlier courses first?

It is not required, but Price Controls 120 and Price Controls 130 explain building blocks and the cost of capital, which the Australian model applies.

Can my team take the course together?

Contact MCC Economics through the consultation page to discuss access for a team or training tailored to your organisation.

Page last reviewed October 2026.

Australian price controls: how the AER sets network revenues

Meet your course instructor

PJ McCloskey