The AER has reviewed and refined its incentive schemes and guidelines that apply to regulated electricity and gas networks to ensure they remain relevant and fit-for-purpose. The review formed part of our strategic objectives over 2020–25 to improve our approach to regulation by being more efficient and focusing on outcomes that matter most to consumers.
On 30 April 2023, we published a final decision on our Review of incentive schemes for network service providers. Changes to our 2013 Capex Incentive Guideline were required in order to implement our final decision. Changes made to our Capex Incentive Guideline were:
- Update to Section 2.3.2 Applying the sharing factor
- Update to Section 2.5 Transparency
- Update to Section 2.6 Application of the CESS to large transmission projects
- New worked examples included at Appendix A & B
Changes to our CESS model were required in order to implement our final decision. An updated CESS model is provided on the final decision milestone.
This CESS model will only apply to our future decisions. This means that the first time this model will be issued will be for the 2024-29 round of distribution network service provider determinations.
The National Electricity Rules (NER) establishes the following incentive schemes:
- Efficiency benefit sharing scheme (EBSS)
- Capital expenditure sharing scheme (CESS)
- Service target performance incentive scheme (STPIS)
- Demand management incentive scheme (and demand management innovation allowance)
- Small scale incentive scheme
These schemes form an important part of our approach to regulating national monopoly electricity and gas networks in Australia. They seek to incentivise regulated network service providers to run an efficient business so that consumers pay no more than necessary for services that they value the most. The outcomes for consumers are designed to mimic the outcomes from effectively competitive markets.
As part of review, we will prioritise those incentive schemes (and components of incentive schemes) that matter most to stakeholders.
On 2 December 2021, we published a discussion paper outlining our proposed priorities and key focus areas for review.
On 11 March 2022, we published a position paper on the Capital Expenditure Sharing Scheme (CESS) for network service providers. The AER held an online stakeholder forum on the review of incentive schemes for regulated networks on 26 August 2022 and we have published the presentations.
On 16 December 2022, we published a draft decision on our Review of incentive schemes for regulated networks. We invited stakeholders to make submissions on our draft decision by 3 March 2023. Submissions have been published on our website.