Applicable conditions for network exemptions

These conditions apply to all exemptions where relevant. Further details may be found in the Network Exemption Guideline (refer to table 6, 7, 8 or 9 as appropriate).

4.1 General Requirements

  1. All meters used for the measurement of electrical energy whether delivered to, or exported by, a customer must comply with the requirements of the National Measurement Act, 1960 (Cth) and regulations made under that Act for electricity meters and sub–meters and with the requirements set out in schedule 7.2 of the NER.
  2. All paid energy consumption must be metered except where the AER has determined an unmetered supply is permitted.
  3. All private networks must, at all times, be installed, operated and maintained in accordance with all applicable requirements (within the jurisdiction in which the network is located) for the safety of persons and property. This includes, where relevant, an industry Code or Guideline otherwise applicable to a network service provider providing similar services.

In some jurisdictions larger networks may also have an obligation to have current, and/or maintain, a safety management plan or similar, with a competent safety authority or regulatory agency within that jurisdiction. You must obey these local safety requirements.

All owners and operators of private networks must comply with the reasonable requests of a local Distribution Network Service Provider (DNSP) for demand forecasting data, relevant details of the physical network infrastructure and assets and any other data relevant to the control, operation or maintenance of the network.

Electrical networks may be subject to mandatory load shedding requirements in emergency situations, in accordance with the NER. This requirement will generally be specified by the local DNSP in the connection agreement for the connection to the NEM system.

  1. Any generation source located within a NSP’s private network must be designed in the event of a loss of supply from the local DNSP’s network to either:
    1. shutdown entirely, or
    2. disconnect from that other network (i.e. ‘island’) and not reconnect except in accordance with arrangements approved by the relevant NEM registered network service provider.
  2. All selling of electricity conducted within a private network must be undertaken by:
    1. where the National Electricity Retail Law applies, a person authorised to sell electricity in accordance with that Law, or
    2. where the National Electricity Retail Law does not apply, a person authorised to sell electricity in accordance with regulations in force in that jurisdiction.

  3. Where charges are to apply for services provided by, or in connection with, an embedded network, a private network must have in place dispute resolution procedures. To fulfill this condition, the exempt embedded network service provider must:
    1. Inform a customer who has a dispute of the availability of a specific external dispute resolution body where an external dispute resolution mechanism or Tribunal exists under non-energy specific legislation with authority to make determinations on disputes which include energy matters.
    2. If 6(a) does not apply and an Energy Ombudsman in a State or Territory advises that an exempt embedded network service provider is eligible to join an Ombudsman scheme, the exempt embedded network service provider must join that scheme and inform a customer who has a dispute of the availability of the specific Ombudsman scheme.
    3. If 6(a) or 6(b) do not apply, a suitable dispute resolution mechanism must be specified in the formal agreements between the network owner or its appointed agent and the end–use customer. These procedures must allow a customer to request, and be provided with, written details of all charges applicable to that customer. In addition:
      1. In the event of a dispute concerning the sale of energy to an exempt customer, and in the absence of a determination of the relevant tenancy tribunal if the customer is a tenant, the exempt embedded network service provider must:
        • make reasonable endeavours to resolve the dispute, and
        • advise the exempt customer of any right that the exempt customer has to access the energy Ombudsman scheme or any other relevant external dispute resolution body in the State or Territory in which the exempt customer is located, if applicable.
      2. The exempt person’s dispute resolution process must meet, at a minimum, Australian Standards: AS/NZS 10002:2014 Guidelines for complaint management in organisations.

A dispute resolution mechanism does not require approval by the AER, but must be of a type ordinarily applicable to disputes of the kind, be reasonably accessible, timely, binding on the parties to the dispute and not subject to excessive or unnecessary costs nor to costs disproportionate to the amount in dispute.

  1. Where a single customer has energy delivered to adjoining sites or to multiple exempt sites within a jurisdiction and the sites are subject to a common supply arrangement and suitable metering is installed, meter readings for that customer may be aggregated for corresponding time periods.
  2. An application for registration is to be made within 20 business days of acquiring a requirement to register. Applications for exemption are personal to the applicant. They are not transferable
  3. The AER may revoke or amend an exemption at any time or may vary the conditions from time to time.
  4. Where notified by a customer (‘life support customer’) of the existence of a requirement to maintain supply for life support equipment, the exempt embedded network service provider must, without undue delay, promptly notify:
    1. before 1 December 2017: the local DNSP of the existence of a life support requirement in accordance with the reasonable requirements of the local DNSP; and
    2. from 1 December 2017: the parent connection point retailer of the existence of a life support requirement in accordance with the reasonable requirements of the parent connection point retailer. In addition the exempt embedded network service provider must, without undue delay, promptly notify the child connection point retailer when they are informed of life support requirements at a child connection point.
  5. An exempt embedded network service provider must not disconnect supply to a life support customer without making arrangements for the safety of a life support customer.
  6. Where an exempt embedded network service provider must appoint an embedded network manager (i.e. an ENM as defined above) to comply with condition 4.4, the appointment must also comply with condition 4.7.
    1. Where an exempt customer is eligible under State or Territory legislation to purchase energy from a retailer of their choice, the exempt embedded network service provider must not do anything to discourage or prevent them from exercising this choice, whether by:
      1. requiring the exempt customer to waive their ability to choose a retailer; or
      2. unreasonably hindering their efforts to find another retailer; or
      3. imposing a requirement for compensation for lost capital, income or profit by a customer exercising the right to access a market retail offer; or
      4. allowing, causing or permitting any other person to do any of the things mentioned in (a), (b) or (c) above;

and, except where the requirements of section 4.9 have been met:

  1. an exempt embedded network service provider or agent must not alter the electrical supply arrangement to a customer or tenant in a private network directly connected to a registered distributor without the written consent of that customer, resident or tenant, freely given; and
  2. a customer, resident or tenant of commercial, industrial or residential premises must not be compelled to become part of a private network or subject to an exempt selling regime without the express written consent of that customer, resident or tenant.
  1. Where condition 4.1.12.1 does not apply, an embedded network owner must not prevent or unreasonably impede a customer, resident or tenant within the embedded network from obtaining, at their own cost, a direct connection to the local distributor.

4.2 Metering installation

The following requirements relate to all new installations and to any reconfiguration of a metering installation within an existing private network.

Metering at the connection point to the NEM is to be determined in conjunction with the relevant transmission or distribution network service provider’s requirements for connection of a customer.

Network owners and operators must ensure that all metering installations used in private networks are fit for purpose and compliant with the requirements of the National Measurement Act, which is administered by the National Measurement Institute and the regulations in force under that Act. The AER does not require an existing metering installation to be upgraded; however, in the event of a billing dispute it will be incumbent on the network operator to demonstrate that the metering installation is accurate.

Transmission networks:

Regardless of whether a network is registered with AEMO or exempted from registration by the AER, all metering in electricity transmission networks must be installed in accordance with all reasonable requirements of AEMO and additionally, in accordance with the requirements specified in a connection agreement with a network service provider.

Distribution networks:

In all private network distribution situations meters must either:
1. be installed in a reasonably accessible location with safe, convenient and unhindered access to facilitate meter reading by the network operator and the customer or their respective agents, testing and meter maintenance, or
2. in private networks serving only private network customers, meters may have remote facilities to permit access to current metering data by customers either by a readout device or by electronic means including via a web portal or other equivalent facility.
Where a meter is provided by a registered retailer, the meter must be installed consistent with the AEMO Metrology Procedure: Part A National Electricity Market. The metrology procedure and technical standards applicable to a metering installation remain subject to the laws of the jurisdiction in which the installation resides.
Where security or safety considerations result in limited access to metering, local arrangements must be made that allow customers or their agents ready access to metering on request.

Off-market and on-market energy generation

All generation (i.e. all off-market and on-market energy generation) installations, whether connected directly or indirectly to a NEM distribution network, must be metered in accordance with the applicable requirements for connection to a NEM distribution or where applicable, transmission network.

It is not intended that small generator installations within private networks should be exposed to unduly onerous metering requirements. For all generator installations adequate metering must be determined in consultation with the relevant NEM registered service provider. For small installations
this may involve a bidirectional meter installed at the connection point to the local distribution network.

A word of caution: Generator installations within private networks do not necessarily enjoy access to government incentive schemes. A generator or solar PV inverter system not directly connected to the local distributor may have no access, or restricted access, to government or industry incentive programs. In particular, access to feed-in tariffs may not be available for such generators. This can be a problem for situations like retirement villages which install solar systems. You should consult your local energy authorities before investing in such systems.

Further details of metering requirements must be obtained from the local electricity distribution or transmission network service provider. Additional requirements set by AEMO apply to generator installations larger than 30MW.

Electric vehicle charging facilities

As this is a deemed exemption category no application is required for exemption.

This classification only applies to a private network with a vehicle charging facility owned by another party connected to a private network. An example might be a shopping centre which allows a vehicle leasing company to install a charging system that can be used by members of the public. An exemption is required by the private network owner/operator (i.e. the shopping centre) because their private network sits between the DNSP and the charging facility.

On the other hand, no network exemption is required if the vehicle charging facility is directly connected to the local distribution network. It will be directly metered by the local DNSP. This applies wherever there is a direct relationship between the DNSP and the charging facility.

Note that the supply of electricity from a charging facility to a vehicle is a service to the transport sector, which is not regulated by the AER.

Where the facility operates only as a load, metering and charging arrangements within the private network may be determined by agreement between the network owner/operator and the proprietor of the charging facility. Although the AER prefers all connections be metered, we permit commercial and industrial (but not residential) vehicle charging arrangements which include an unmetered connection.

A vehicle charging facility which has a capacity to export electricity into the local distribution network must also comply with the metering requirements in clause 4.2.3 for energy generation sources.

4.3 Metering accuracy

This section applies wherever a meter is required to be installed. Otherwise, it does not apply.

Meters used within private networks must be pattern approved, consistent with the requirements of the National Measurement Act 1960 (Cth) and regulations made under that Act, in accordance with the equivalent requirements for NEM electricity meters and to accuracy classes as stipulated in schedule 7.2 of the NER, unless otherwise exempted by the National Measurement Institute.

4.4 AEMO & retail competition

Clause 4.4 of the electricity network service provider (NSP) registration exemption guideline applies wherever a customer has access to retail competition, even if located within a private network. Currently, this applies in New South Wales, South Australia and Victoria. Registration in class NR05 is optional if no customers exercise their right to accept a market offer. However, pre-registration is recommended because it saves later paperwork. Registration (within 20 business
days) becomes compulsory if a customer chooses to exercise this right.

Billing and settlement of meters in a private network is complex. Explaining how the metering and settlement system operates is beyond the scope of this guideline.

If a tenant or customer of a private network decides to take supply from a market retailer the following requirements will apply.

The metering arrangements for customers obtaining supply from a NEM registered retailer must comply with all applicable AEMO requirements for the installation and maintenance of a metering installation, the registration of meters, provision of metering data and, where necessary, the transfer of the customer to another retailer.

These requirements are published by AEMO in a metrology procedure and the associated AEMO embedded network guideline. A private network operator is required to permit reasonable access and provide details of the ‘gate’ (i.e. ‘parent’) meter to an accredited metering service provider or a registered NEM participant or an agent, as appropriate, appointed by the ‘Responsible Person’ for the provision, installation, registration, reading and maintenance of the metering installation.

In private networks where none of the customers obtain supply from a NEM registered retailer there is no immediate need to apply unique metering identifiers (NMIs) to the metering installation apart from the ‘parent’ meter. However, as soon as a customer within a private network commits to obtain supply from a NEM registered retailer there is an immediate need for both the ‘parent’ and the ‘child’ meter for that customer to be recorded in the metering and settlements system. This will normally be arranged by the retailer for the customer in the first instance. Other customers are unaffected.

Note that condition 4.1(12) of the electricity network service provider (NSP) registration exemption guideline applies to all private networks in New South Wales, South Australia and Victoria where a customer in the private network has elected to obtain supply from a NEM registered retailer. This condition requires the network owner to facilitate access to retail competition.

The right of a customer to access retail competition is absolute. A private network owner or their agent must not impede a customer who has chosen to exercise that right nor may they impose unfair or unreasonable conditions on the customer.

4.5 Distribution loss factors

Distribution loss factors (DLFs) are governed by clause 3.6.3 of the NER. Under clause 3.6.3(b)(2)(i)(B) a ‘small load’ is any load or a collection of loads which, in total, is less than 10MW peak demand or 40 GWh per annum.

In private networks which in aggregate constitute a ‘small load’ and which serve a number of smaller loads (‘children’) the AER considers that network losses within the network will generally not be of sufficient magnitude to warrant adopting a DLF within the network that is different to the DLF that would be applied by the local DNSP at the metered point of connection, where practicable, or the DLF otherwise applicable to the connection of the embedded network to the local distribution network — i.e. at the ‘parent’ meter. However, although the children may each be small loads, the combined loading may result in an embedded network becoming a significant load, in which case clause 9(2) or 9(3) will apply.

For small loads the appropriate DLF applicable to the ‘child’ meters within the installation is the DLF as would be determined by the local DNSP. This approach will relieve the operator of a private network of the requirement to calculate and seek annual approval of a DLF for the child meters within that network.

For larger loads, generators and site specific loss factors:

  1. Clause 3.6.3(b)(2)(i) of the NER applies to the calculation of a DLF for large loads and generators connected to a network. In private networks involving loads or generators otherwise described in clause 3.6.3(b)(2)(i) a site specific DLF for those loads or generators must be calculated in accordance with clause 3.6.3(b)(2)(i) using the methodology published for this purpose by the local DNSP.
  2. Where the methodology of the local DNSP is not suitable for the calculation of a site specific DLF for any reason, the network operator and the connecting party may jointly approach the AER and seek approval of an alternative methodology for determining the applicable allocation of electrical losses between the parties. Approval by the AER will be subject to there being no material impact on the rights of another party as a consequence of the alternative mechanism.

Note that DLFs, including site specific DLFs, must be approved annually by the AER in accordance with the NER, clause 3.6.3(i).

4.6 Pricing

The following paragraphs describe predefined pricing arrangements accepted by the AER for network charges in private networks. Table 11 sets out the charge groups which may apply to private networks.

Our agreement to a network charging mechanism is predicated on a requirement that there must not be a sustained over-recovery of any network charge. Where an over-recovery occurs, it is required to be rebated to customers at intervals of not more than annually. Note that the energy component of any charge is subject to the Retail Exempt Selling Guideline.

External network charges

External network charges may be levied by a registered NEM network service provider and charged to the parent meter of a private network. These charges are known variously as ‘transmission use of system charges’ (TUOS), ‘distribution use of system charges’ (DUOS) and ‘network use of system’ (NUOS) charges depending on the State in which the network is located. Such charges may be apportioned to each customer in a private network on a ‘causer pays’ basis in proportion to the metered energy consumption of each customer over the equivalent period no matter which charge group or groups apply (see Table 6 of the Network Guideline). Alternatively, the charges borne by each customer may be determined on a ‘shadow price’ basis. In this context a ‘shadow price’ is charging each customer a tariff no greater than the tariff that would have applied had that customer obtained supply directly from the local NEM registered distribution or, where appropriate, transmission company.

Internal network charges

The AER does not encourage separate network charges for private networks. Few, if any, situations currently exist where such charges are warranted. The formal determination ofnetworks charges by the AER is a complex and involved process, the costs of which will usually be disproportionate to the scale of a private network.

Charge group Description Applicable situations
Network charges - Applicable charging groups
A Bundled energy and external network tariff All retail selling (i.e. the vast majority of situations whereby energy is sold to customers
within a private network).
B No additional network charge Unrestricted: there is no charge for the network or, the applicant is billed for network services by a distributor and is passing that cost on to customers in proportion to their
metered energy use or, the pass-through of costs incurred to meet customer requirements.
C Value added services

Large customers and network specific activities subject to commercial arrangements agreed between consenting, well informed (i.e. sophisticated) customers. Eligible private networks only. Restricted application (see text).

Charging mechanism for network charges is specified in a commercial agreement.

D Separate charge for private network facilities Registered and individually exempted networks. Pricing determined by the AER.
E Rebate for exported energy Unrestricted

 

Group A

May apply to any retail onselling situation where customers are charged an energy only charge or all-inclusive tariff which includes external network charges. Many energy consumers are ultimately concerned with the overall expense of their energy consumption. The critical point of comparison in this situation is the bundled price of energy and network charges. The AER considers that bundled tariffs which include all network charges are unlikely to be contrary to the long term interests of consumers.

Group B

No charge is made for the private network assets. However, externally imposed charges may be applied pro-rata to customers as per section 4.6.1 of the electricity network service provider (NSP) registration exemption guideline. This may apply in any private network situation.

Note that the agreed cost for the initial establishment or upgrade of a network to meet customer requirements may still occur, i.e. may be passed through to the customer, in accordance with a bona fide lease or ancillary agreement between the network owner, operator or controller (as appropriate) and the network customer. Such charges may be subject to normal commercial financing arrangements.

Group C

Applicable to network charges for exempt network classes NDO1, NDO2, NDO3, NDO4, NDO5, NDO6, NR5, NRO1, NRO2, NRO3 and NRO4 and individual exemptions approved by the AER in accordance with section 5.3 of the electricity network service provider (NSP) registration exemption guideline. The network proprietor provides additional services to customers of the network such as on-site fault repair services or charging is based on a commercial agreement freely entered into on mutually agreed terms.

This group is intended to apply to commercial, industrial and mining situations and private networks serving large customers or on-site generation exporting to the NEM. The general principle which applies here is that commercial arrangements between parties with similar bargaining power should not be regulated. Energy on–selling to small customers is not permitted within this charge group in accordance with the relevant provisions of the AER’s Retail Exempt Selling Guideline.

Where it can be demonstrated that access to the NEM would not otherwise be available except at significant cost to the affected customers, the network may also service supporting infrastructure, isolated communities, emergency services, farms and pastoral holdings and unrelated loads or generators on reasonable commercial terms.

Group D

Charge group D is for new individual exemptions only. Exemptions in this category will only be contemplated in exceptional circumstances and require individual approval by the AER in accordance with section 5.3 of the electricity network service provider (NSP) registration exemption guideline. Parties wishing to earn a commercial return on network assets should generally be registered as a network service provider and be subject to the operation of chapter 6 or chapter 6A of the NER. Applicants in this charge group would need to demonstrate that NEM registration and compliance costs would be disproportionate to the size of the community to be served by the network and that compelling grounds exist for an exemption to be considered.

Group E

Where a generator within a private network earns credits for energy exported to the NEM all credits remain the property of the embedded generator. All credits must be rebated to the embedded generator or, if more than one, to each embedded generator in proportion to the credits earned. This requirement does not prevent the embedded generator from entering into an agreement with another party to reallocate those credits.