Regulatory innovation

Status: 
Date initiated: 
23 March 2018
Effective date: 
1 January 2021
Contact: 
Regulatory Innovation enquiries, Mr Mark McLeish RegulatoryInnovation@aer.gov.au

Overview

In June 2017, the AER, Energy Networks Australia (ENA) and Energy Consumers Australia (ECA) launched a joint initiative to explore ways to improve sector engagement, and identify opportunities for regulatory innovation. The goal of this initiative is to ensure that customers’ preferences drive energy network businesses proposals and regulatory outcomes.

On 23 March 2018, the agencies jointly released a draft process to enable consumer perspectives to be reflected in regulatory proposals in advance of lodging those proposals for the AER’s assessment under the legislative framework. This draft process is called New Reg: Towards Consumer-Centric Energy Network Regulation.

The New Reg Process

Under this process the most significant departure from traditional practice is that a Customer Forum is tasked with seeking to agree aspects of the regulatory proposal in advance of lodgement with the AER. The Customer Forum is not a representative body, but must represent the perspectives of customers through research and direct engagement with customers.

The Customer Forum’s representatives are selected to credibly represent perspectives of all end users, be they residential, small business or commercial and industrial. These persons are also required  to have relevant skills and experience to ensure they function as an effective and robust counterparty to the network business.

Two key documents detail the process and set out responsibilities of the parties involved:

  1. The Early Engagement Plan, which is a document provided to the AER by the network business outlining the process the business intends to undertake to develop its regulatory proposal; and
  2. The Early Engagement Agreement (or Memorandum of Understanding), which is between the network business, the customer forum and the AER and sets out the roles and expectations of each of the parties and broader governance arrangements for the trial’s conduct.

AusNet Services’ Trial

On 23 March 2018 it was announced that AusNet Services Limited would be the first network business to commit to a trial of the New Reg process.

Customer forum membership

The Customer Forum consists of five members:

  • Tony Robinson;
  • Helen Bartley
  • John Mumford
  • Greg Camm
  • Dianne Rule

Greater detail about each member can be found on AusNet Services website. More detail on the selection process for AusNet Services’ Customer Forum is set out in section 3.5 of AusNet Services Early Engagement Plan.

Early engagement plan

On 11 May the AER accepted AusNet Services’ Early Engagement Plan. The Early Engagement Plan explains in detail how AusNet Services intends to implement the New Reg process, in particular, it addresses key matters including:

  • Governance arrangements for the operation of the Customer Forum, including the development of the Engagement Agreement
  • The recruitment process for customer forum membership
  • The proposed operations of the customer forum
  • Integrating New Reg with existing Electricity Distribution Price Review customer engagement
  • An indicative scope of matters that could be negotiated with the Customer Forum
  • The proposed role of the AER, ECA and AusNet Services’ Customer Consultative Committee

The process is intended to run until July 2019 during which time the Customer Forum will:

  • Initially undertake intensive training, investigation, scoping and agreeing to time frames
  • Before moving to a first negotiation period, ahead of the release of AusNet Services’ Draft Regulatory Proposal

Throughout this period the Customer Forum is expected to undertake ongoing research activities to better understand and implement consumer preferences.

After this time the Customer Forum will:

  • actively engage and consult on the Draft Revenue Proposal and finally,
  • conduct a second negotiation period before the release of Revenue proposal.

Memorandum of understanding

On 8 June 2018 the parties finalised the Early Engagement Memorandum of Understanding, to set out their respective roles.

The Memorandum of Understanding formalises governance arrangement of the customer forum and the expectations of the Customer Forum, AER and AusNet Services. In this respect it addresses key matters such as:

  • AusNet Services’ responsibilities in funding the Customer Forum
  • The scope of negotiations between the Customer Forum and AusNet Services and how this must work within the auspices of the National Electricity Law and Rules
  • Anticipated timelines for the process
  • How the AER is required to inform, assist and facilitate the Customer Forum process.
  • The capacity of both the AER and AusNet Services’ to terminate the process
  • The draft and final Engagement Reports to be drafted by the Customer Forum, which explain the scope matters agreed and disagreed by the Customer Forum and AusNet Services.