Review of incentive schemes for regulated networks

Status: 
Date initiated: 
2 December 2021
Effective date: 
1 September 2022
Contact: 
AER General Inquiries AERInquiry@aer.gov.au
AER reference: 
AER212854

Overview

On 11 March 2022, the Australian Energy Regulator (AER) released a position paper on the Capital Expenditure Sharing Scheme (CESS) for network service providers.

We invite stakeholders to make submissions on this position paper by Friday, 9 September 2022. The AER held an online stakeholder forum on the review of incentive schemes for regulated networks on 26 August 2022 and we have now published the presentations online. 

The AER will take submissions and feedback from the workshop into account in finalising its draft decision, to be released in November 2022. 

Background

We are reviewing and refining our incentive schemes and guidelines that apply to regulated electricity and gas networks to ensure they remain relevant and fit-for-purpose. This forms part of strategic objectives over 2020–25 to improve our approach to regulation by being more efficient and focusing on outcomes that matter most to consumers.

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. The discussion paper we published on 2 December 2021 outlines our proposed priorities and key focus areas for review.