General background of transfer of functions from ESCV to AER

The Australian Energy Regulator (AER) assumed responsibility for the economic regulation of Victorian electricity distribution network service providers (DNSPs) from 1 January 2009. This function was previously the responsibility of the Essential Services Commission of Victoria (ESCV). The new responsibilities are conferred upon the AER by the operation of the National Electricity (Victoria) Act 2005 (NEVA) in accordance with the Trade Practices Act 1974 and the Australian Energy Market Agreement. The NEVA specifically confers economic regulatory functions, powers and duties on the AER. The AER will also assume responsibility for some related non-economic functions. These non-economic functions are to be specified in a Victorian Order in Council under section 21 of the NEVA and were previously also the responsibility of the ESCV.

Separate to these responsibilities, the next distribution determination for the Victorian DNSPs’ prices will be undertaken by the AER. This determination will commence on 1 January 2011. The process for the distribution determination is governed by chapter 6 of the National Electricity Rules (NER).

In anticipation of the 2011–15 distribution determination, the AER will release a framework and approach paper for the Victorian DNSPs in May 2009. This paper will set out the forms of control that will apply under the distribution determination and the AER’s likely approach to:

classification of services;
the application of a service target performance incentive scheme (STPIS);
the application of an efficiency benefit sharing scheme (EBSS) and;
the application of a demand management incentive scheme (DMIS)

The AER’s preliminary positions paper on the framework and approach for Victorian DNSPs can be found on the AER's website. The AER is currently consulting on this paper and a proposed DMIS for Victorian DNSPs and is seeking submissions on both these documents from stakeholders by 6 March 2009.