AER releases draft decision on Values of Customer Reliability

The Australian Energy Regulator (AER) has today released its draft decision for the Values of Customer Reliability (VCR) review. The draft decision sets out the AER’s draft methodology for developing VCR values for the National Electricity Market (NEM) and the Northern Territory.

This draft decision builds on the methodology used by the Australian Energy Market Operator (AEMO) to estimate VCRs in their 2014 NEM-wide study for outages up to 12 hours in duration. In the draft, the AER proposes to use modelling techniques to estimate VCRs for widespread and long duration outages of more than 12 hours duration.

VCRs seek to reflect the value different types of customers place on reliable electricity supply under different conditions and are usually expressed in dollars per kilowatt hour ($/kWh). VCRs link efficiency and reliability, playing a pivotal role in network planning and investment, and informing the design of wholesale market standards and settings, and network reliability incentives.

This draft decision incorporates stakeholder input received through the consultation process, as well as advice from expert consultants who are engaged to assist us to develop the methodology.

The draft methodology follows an extensive consultation process, including:

  • regular meetings of the VCR Consultative Committee, which includes representatives from energy agencies, customer groups, industry and State energy regulators;
  • the publication of a Consultation paper (October 2018) and a Consultation update paper (April 2019); and
  • consideration of submissions made in response to these consultation papers.

The AER is scheduled to make its final decision on its methodology in mid-November 2019 and publish VCR values derived in accordance with this methodology in December 2019. These VCR values will apply from 1 January 2020 to 31 December 2025.

Background

The AER is conducting a review to determine the values different customers place on having a reliable electricity supply.

The values of customer reliability (VCR) plays a pivotal role in network planning and investment and informs the design of market and network price caps and incentives, such as for network reliability.

The last review of VCR was undertaken in 2014 by the Australian Energy Market Operator (AEMO). Our review will update the methodology AEMO employed to determine VCR to take account of changes in the National Electricity Market since 2014.

Invitation for submissions

We invite interested parties to make submissions on this draft decision by 5pm AEST Friday 18 October 2019.

Submissions should be sent to vcr@aer.gov.au

Alternatively, submissions can be mailed to:

Mr Mark Feather
General Manager, Policy and Performance
Australian Energy Regulator
GPO Box 520
Melbourne VIC 3001

We will take into account submissions in developing our final decision on the VCR methodology.

The AER prefers that all submissions be sent in an electronic format in Microsoft Word or other text readable document form and publicly available, to facilitate an informed, transparent and robust consultation process. Accordingly, submissions will be treated as public documents and posted on the AER's website, unless prior arrangements are made with the AER to treat the submission, or portions of it, as confidential. Those wishing to submit confidential information are requested to:

  • clearly identify the information that is the subject of the confidentiality claim; and
  • provide a non-confidential version of the submission.

For further information regarding our use and disclosure of information provided to us, see the ACCC/AER Information Policy.

Sector: 
Issued date: 
18 September 2019
AER reference: 
AC 132/19
Contact: 
General enquiries - Values of Customer Reliability vcr@aer.gov.au