Ring-fencing

The electricity and gas rules impose specific obligations on regulated electricity and gas network businesses. The purpose of ring-fencing is to prevent regulated businesses from:

  • discriminating in favour of their related parties to disadvantage competitors operating in these markets
  • using revenue earned from regulated services to cross-subsidise contestable services.

The specific ring-fencing obligations differ between electricity and gas, and distribution and transmission. On this page you will find information about the ring-fencing frameworks we administer.

Electricity distribution

In practice, ring-fencing requires legal and functional separation of a regulated network business from related parties.

Our ring-fencing frameworks set out the specific obligations applicable to network businesses. In particular, the obligations include regular reporting of compliance as well as preparation of annual compliance reports that have been assessed by appropriately qualified independent assessors.

  • On 30 November 2016, we published the Ring-fencing Guideline (Electricity Distribution) (Version 1), which applies across the NEM. We also published an explanatory statement to assist in understanding the Guideline and to explain why we have reached the positions set in it. 
  • The guideline came into effect on 1 December 2016 and distribution network service providers (DNSPs) were required to comply with the guideline no later than 1 January 2018, subject to any waivers.
  • On 17 October 2017, we published the Ring-fencing Guideline (Electricity Distribution) (Version 2). 
  • On 3 November 2021, we published the Ring-fencing Guideline (Electricity Distribution) (Version 3). DNSPs will need to comply with Version 3 of the guideline from 3 February 2022, subject to any waivers.

Key information

AER Annual reports

From 2020 the Annual Ring-fencing Compliance Report was superseded by the AER Annual Compliance and Enforcement Report which contains a ring-fencing section. 

Compliance

Electricity transmission

The Ring-fencing Guideline (Electricity Transmission) was published in 2002 by the ACCC and underwent a minor update in 2005, when the AER became the responsible regulator. The 2005 compendium of regulatory guidelines includes provisions relating to electricity transmission. This Guideline is based closely on the approach developed by the ACCC in 2002. The compendium includes guidelines for some issues that are now superseded.

Compendium of electricity transmission regulatory guidelines 2005

With the review and implementation of ring-fencing arrangements for electricity distribution completed in 2016, a review of the Transmission guideline commenced in the second half of 2019, but paused due to other work priorities resulting from the COVID-19 pandemic. This review will recommence shortly. 

Ring-fencing guideline (Electricity Transmission) full review

As part of this review of the current guideline, the AER has identified that there is an enforceability issue with the existing guideline. The AER has issued a draft guideline to address this.

Ring-fencing guideline (Electricity transmission) interim

Gas distribution and transmission 

Gas Distribution and Transmission Ring-fencing obligations of gas service providers are governed under the National Gas Rules.

Ring-fencing waivers

We publish all ring-fencing waivers that apply to multiple ring-fencing frameworks: electricity distribution, electricity transmission, gas distribution and gas transmission.

Contact

Ring-fencing enquiries relating to electricity distribution and transmission or gas distribution and transmission should be directed to AERringfencing@aer.gov.au.