Project timeline

Type
Sector
Electricity
Segment
Distribution
Embedded Networks
Retail
Transmission
Region
Australian Capital Territory
New South Wales
Queensland
South Australia
Tasmania
Victoria
Status
Open
Date initiated
Effective date
Categories
Exemption guideline
Retail exempt selling
Retailer authorisation
AER reference
AER22006642

The AER is undertaking a Review of the AER exemptions framework for embedded networks. The objectives of this review are to:

  • Better understand the harms, or risk of harms, residential embedded network customers may be facing

  • Better understand the benefits of residential embedded networks, and the extent to which customers are receiving them
  • Determine whether action is needed, which could include strengthening regulatory oversight of embedded networks, enhancing reporting arrangements and consumer protections, and restricting the growth of future residential embedded networks.

On 30 November 2023, the AER published an issues paper seeking stakeholder feedback on the benefits and harms due to embedded networks, and whether there is a case for us to make changes to the regulatory framework.

Submissions are due by 4 pm, Monday, 5 February 2024.

Background

Embedded networks are private electricity networks that can serve multiple customers. In most cases, the embedded network operator buys energy from an energy retailer and on-sells it to the occupants of the site. Residential embedded networks include retirement villages, caravan parks and large apartment complexes.

The AER regulates who can operate embedded networks and on-sell energy within them. We do this through a framework that exempts entities, who sell or supply energy within embedded networks, from aspects of the standard energy framework. We govern this exemptions framework through our Network Exemptions Guideline (the Network Guideline) and Retail Exempt Selling Guideline (the Retail Guideline).

Considerable growth in embedded networks, coupled with concern about customers facing worse price and consumer welfare outcomes has led to several jurisdictional reviews and inquiries. These have identified a range of potential harms for embedded network customers. These include barriers to accessing retail competition, placing embedded network customers at risk of monopolistic pricing, and limited ability for the AER to monitor compliance or take enforcement action. The inquiries also noted potential benefits, including lower energy prices.

Given the issues identified through the various inquiries, and the changes that are driving the growth in embedded networks, it is timely for us to examine whether the current arrangements are working in the long-term interest of consumers, and if not, what regulatory change is warranted.