Response to Professor Garnaut's Climate Change Review Update

The Australian Energy Regulator notes the concerns expressed in Professor Garnaut's Climate Change Review Update that weaknesses in the regulatory framework may have contributed to overinvestment in networks and unnecessarily high prices for consumers.

The AER has almost completed its first round of price decisions for electricity networks in the National Electricity Market.

As Professor Garnaut points out, the AER is now examining the Rules it is required to apply when considering investment proposals from network businesses.

"Our internal examination will focus on whether the rules strike the right balance between the interests of consumers with the needs of network businesses," said Andrew Reeves, chairman of the AER.

"The significant increases in network prices have been principally driven by the increased investment necessary to replace ageing assets, increased consumer demand, growing customer connections and higher reliability standards.

“However, it is timely to consider the role the regulatory framework has played and ensure that it is only allowing efficient investment, otherwise consumers will pay higher prices than necessary," Mr Reeves said.

Proposals for changes to the regulatory framework will be made to the Australian Energy Market Commission (AEMC), the body responsible for the National Electricity Rules.

Issued date: 
29 March 2011
AER reference: 
NR 004/11
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