AER provides guidance on the interaction between ring-fencing and the AEMC's distributor-led stand-alone power systems draft rules

The Australian Energy Regulatory (AER) has today published an Explanatory Note on the interaction between ring-fencing and the AEMC's report and draft proposed rules for distributor-led stand-alone power systems (SAPS). The Explanatory Note should be read in conjunction with the AEMC's report and draft proposed rules, also released today, containing a package of rule changes to enable distribution network businesses to supply customers using stand-alone power systems, where this is a more efficient option than maintaining a connection to the grid.

The Explanatory Note is designed to supplement the AEMC's report and draft proposed rules. It provides clarity to stakeholder on how the AEMC's proposed SAPS service delivery model would be treated under the AER's Electricity Distribution Ring-fencing Guideline. The Explanatory Note provides guidance to stakeholders on when a ring-fencing waiver to allow a distributor to provide SAPS generation services may be needed, and how we might assess SAPS-related ring-fencing waiver applications. Under the AEMC's proposed rules, SAPS generation would not be a distribution service. As such, these services woiuld be subject to ring-fencing and could not be offered by a DNSP, unless the AER agreed to a waiver.

Stakeholders are welcome to provide comments on the Explanatory Note as part of their submissions to the AEMC's draft report on distributor-led SAPS. Submissions to the AEMC are due by 13 February 2020, and can be lodged via the AEMC's website.


Ring-fencing supports innovation by promoting competition in markets for electricity services. Ring-fencing also supports the efficiency of regulated network services provided to consumers on a monopoly basis. It does this by requiring a network service provider to separate parts of its business that provide regulated services from the parts of its business that offer unregulated services into competitive markets.

Further enquiries on ring-fencing can be directed to

Issued date: 
19 December 2019
AER reference: 
AC 195/19
General enquiries - Ring-fencing