Investor Presentaiton

Regulatory regime • AER determines Ausgrid's annual expected revenue requirement based on a building block methodology - this is set at the commencement of each regulatory period (typically 5 years), providing transparency and revenue certainty throughout the period Customer tariffs are set annually based on an AER agreed methodology (i.e. a Tariff Structure Statement approved as part of the revenue reset process) during each regulatory period to allow Ausgrid to recover its revenue requirement Under the revenue cap form of regulation, tariffs are adjusted to account for over/under recovery of revenue requirement in previous years, whilst under a price cap mechanism the price is limited for the applicable service RAB Opening value of assets Depreciation over period + Capex Asset disposals + CPI indexation (inflation protection) Revenue 1 requirement Average tariffs Return on capital + RAB WACC 2 Opex allowance + Regulatory depreciation 3 Tax allowance Efficiency carryover Revenue requirement 4 Forecast volume Actual revenue = Average tariffs X Actual volume Annual price setting process sets tariffs based on revenue requirement and provides: 1) Inflation protection – revenues are adjusted for observed CP15 on a lagged basis 2) Volume protection – adjustments for differences in forecast and actual volumes (revenue cap) 3) Interest rate protection – update to cost of debt in regulatory WACC to incorporate changes in interest rates 1. The revenue requirement could include a reduction from the application of the shared assets guideline (if a materiality threshold is met) 4. The financial outcome for the application of the STPIS scheme will be added to the revenue requirement in deriving an average tariff 32 23 2. Weighted average cost of capital 5. Consumer Price Index (Sydney all groups) published by the Australian Bureau of Statistics 3. Equal to depreciation over period less CPI indexation Ausgrid

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