Regulator welcomes proposed changes to energy network rules

The Australian Energy Regulator considers that changes proposed to the National Electricity Rules would benefit electricity consumers and promote efficient network investment.

In a draft decision released today, the Australian Energy Market Commission (AEMC), the rule making body, proposes to reform the rules for setting prices for energy network businesses.

AER chairman Andrew Reeves said the changes proposed by the AEMC would promote the interests of electricity consumers, now and into the future.

"The proposed rules would support the investment needed for reliable delivery of electricity and consumers could be confident that network prices are justified."

The AER's initial view of the AEMC's proposed changes is that they would significantly improve the rules for setting prices for energy network businesses.

"Changes to the approach for setting operating and capital allowances give the regulator greater scope to reject excessive proposals. Clear authority to benchmark network business practices and costs will ensure customers are paying no more than necessary for the services they require," Mr Reeves said.

The AEMC's proposed changes would also provide the AER with greater scope to scrutinise investment spending by network businesses.

"While network businesses will be rewarded for undertaking efficient and necessary investment, consumers will not be required to 'foot the bill' for inefficient overspending," Mr Reeves said.

The AER welcomes the focus on improving the opportunities for meaningful customer involvement.

"The recommended changes require network businesses to actively engage with their customers to determine what services customers want," Mr Reeves 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."

The AEMC's proposed changes would also introduce an improved framework for setting rates of return for electricity and gas networks.

"This will allow the regulator to set rates of return that better reflect efficient financing practices, and provide appropriate incentives for businesses to undertake needed investment. The regulator will be required to develop its approach to setting the rates of return in consultation with the industry, consumers and other interested parties," Mr Reeves said.

The AER considers the proposed changes to the rules will ensure that the networks are developed to meet customer needs while providing the businesses with the assurance of funding to meet at least efficient costs.

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.

In September 2011, the AER submitted proposals to the AEMC to address concerns that consumers were paying more than necessary for safe and reliable energy supply. The AEMC's draft decision released today responds to the AER's proposals.

Issued date: 
23 August 2012
AER reference: 
NR 013/12
Mr Andrew Reeves, AER Chairman 0419 397 956
Mr Brent Rebecca, Media unit (02) 6243 1317 0408 995 408