AER says that fixing electricity market rules vital to energy reform

Reforming the rules for setting prices for electricity network businesses is a vital part of market reform, according to Acting AER Chairman, Ed Willett, in a presentation to the Energy Users Association of Australia (EUAA) Annual Conference in Sydney today.

“Deficiencies in the rules have meant that consumers have been paying more than necessary for a safe and reliable electricity supply,” Mr Willett said.

“In particular, the rules have constrained the AER’s ability to deal with inflated expenditure forecasts and have locked in rates of return that do not reflect a business’s actual financing practices.”

Mr Willett emphasised that proposed changes to the rules, recently announced by the rule making body the Australian Energy Market Commission, were a very significant step forward.

“These proposals will make a substantial difference to determination outcomes in the interests of consumers. They allow us to more appropriately scrutinise a network business’s proposal and ensure that consumers pay no more than necessary for the services they require,” Mr Willett said.

Mr Willett also welcomed the focus in the proposed rules on improving the opportunities for meaningful customer involvement.

"The proposals require network businesses to actively engage with their customers to determine what services customers want," Mr Willett said. "Changes to the regulatory process will improve the opportunities for customers to hold businesses to account for the delivery of those services at a reasonable price. Importantly for larger customers, changes to the rules better allow bilateral negotiations between network businesses and large business consumers on tariff levels."

The AER is an independent body with responsibility for the economic regulation of the electricity transmission and distribution networks in the national electricity market. The process by which it undertakes these regulatory responsibilities is set out in detailed electricity rules.

Issued date: 
24 October 2012
AER reference: 
NR 020/12
Duncan Harrod, Media unit (02) 6243 1108 0408 995 408