Demand management incentive scheme and innovation allowance mechanism

Demand management incentive scheme
Date initiated: 
5 August 2016
Effective date: 
31 October 2017
General inquiries - Demand management
AER reference: 


The AER has commenced developing a new demand management incentives scheme and innovation allowance mechanism. This scheme and allowance mechanism complement our ongoing reforms targeting consumer choice and more efficient network pricing outcomes. These include our work on tariff reform, metering contestability, ring-fencing and a rule change to strengthen the transparency and efficiency of replacement expenditure.

The scheme’s objective is to provide electricity distribution businesses with an incentive to undertake efficient expenditure on non-network options relating to demand management. The separate innovation allowance mechanism’s objective is to provide distribution businesses with funding for research and development in demand management projects that have the potential to reduce long term network costs.

We invited written submissions on a consultation paper to inform the development of a robust, best practice scheme and allowance mechanism. The consultation period closed on 24 February 2017, which was followed up with a demand management Options Day workshop on 6 April 2017 and a Directions Forum videoconference on 29 June 2017. Our next project step will be to publish our draft scheme and allowance mechanism, along with their respective explanatory statements.

AER timetable (indicative)
Milestone Date
Publish draft scheme and allowance mechanism August 2017
Stakeholder engagement event September 2017
Publish final scheme and allowance mechanism October/November 2017

Last updated July 2017