Values of customer reliability

  • Accepting submissions
Sector: 
Status: 
Date initiated: 
19 October 2018
Effective date: 
31 December 2019
Contact: 
General enquiries - Values of Customer Reliability vcr@aer.gov.au
AER reference: 
PRJ1003080

Overview

On 18 December 2019 we released our final report on the Values of Customer Reliability (VCR) review, setting out the VCR values for unplanned outages of up to 12 hours in duration (i.e. standard outages) for the National Electricity Market and the Northern Territory. This is is the largest VCR study ever conducted in Australia with over 9 000 residential, small business and industrial energy customers completing the survey.

Our final VCRs for standard outages are calculated in accordance with our methodology for deriving VCR values (published on 26 November 2019). Our final VCR values have been quality assured by the Melbourne Energy Institute and our survey results were cross checked against calculations undertaken by KPMG.

On 23 March 20 we published a draft model developed with ACIL Allen to estimate the costs of Widespread and Long Duration Outages (WALDO) for stakeholder consultation.

As set out in the background below, as part of the review we have consulted widely with governments, energy regulators, customer and industry representatives and customers themselves.

Background

The AER conducted a review to determine the values different customers place on having a reliable electricity supply.

On 19 October 2018, we released our consultation paper on VCR. Following our public forums in Sydney and Melbourne in December 2018 we extended the submission period on our Consultation Paper until 20 December 2018.

On 18 September 2019, we released our draft decision on Values of Customer Reliability (VCR). The draft decision sets out our draft methodology for developing VCR values for the National Electricity Market and the Northern Territory. It builds on the methodology used by the Australian Energy Market Operator to estimate VCRs in their 2014 NEM-wide study for standard outages. The draft decision discusses our methodology for determining VCR values for standard outages up to 12 hours, widespread and long duration outages greater than 12 hours, and the annual adjustment mechanism. It also provides a summary of submissions we received in response to our Consultation and Consultation Update papers.

On 26 November 2019, we released our final methodology on Values of Customer Reliability (VCR). The final methodology sets out our approach for developing VCR values for the National Electricity Market and the Northern Territory. The final methodology is the result of an extensive consultation process that commenced in October 2018. In that process we engaged widely with governments, energy regulators, customer and industry representatives and the public, as well as expert consultants.

We established a Consultative Committee and Subcommittee that provided views to us on matters relating to VCR.

The VCR plays an important role in ensuring consumers pay no more than necessary for safe and reliable energy, helping energy businesses identify the right level of investment to deliver reliable energy services to customers.

The last review of VCR was undertaken in 2014 by the Australian Energy Market Operator (AEMO). Our review updates the methodology AEMO employed to determine VCR to take account of changes in the National Electricity Market since 2014.