Energy Networks Australia 2026 Regulation Seminar
Keynote regulator's address by AER Chair Clare Savage
5 August 2026
Good afternoon, and thank you for the invitation to join you.
Firstly I would like to acknowledge the Turrbal and Jagera people as the Traditional Custodians of the land and waters of Meanjin (Brisbane), and pay respects to Elders past, present, and emerging.
It is a pleasure to be back at the Energy Networks Australia Regulation Seminar.
Australia has been handed an assignment with a distinctly Mission: Impossible quality: transform its energy system while it continues to power and grow the country.
Some of you may remember my fondness for a good Tom Cruise film, so perhaps that comparison was inevitable (well certainly the speech writing team thought so! I might have gone for Risky Business though rather than Mission Impossible…).
We need to connect new generation and rapidly growing loads, make more dynamic use of distribution networks, unlock flexible demand and consumer energy resources, and strengthen resilience. And we need to do it while maintaining reliability and keeping costs as low as possible.
Success will depend on consumer needs, choices and resources shaping the transition, and on governments, market bodies, regulators, network businesses and service providers coordinating their decisions with consumers’ long-term interests in view.
One important change is the emergence of active distribution system operation.
The policy direction is clear: this function will sit with distribution network service providers. But it should be recognised as a distinct function, not simply absorbed into a larger collection of network responsibilities.
The established network role is to plan, build, operate and maintain essential infrastructure. But the system now asks a broader question: how do we make the best possible use of infrastructure, information, flexible resources and market services across the whole system?
That means coordinating energy flows from generation and storage assets within the distribution system, enabling flexibility where it can reduce costs or manage constraints, and drawing on market services where they can meet a system need more efficiently.
These functions are complementary, but distinct. Network planning already considers how infrastructure, demand management and non-network solutions can meet future needs efficiently. Active system operation extends that discipline into day-to-day operation, coordinating capacity, flexible demand, storage and market services as conditions change.
That tension is not a flaw. It should produce better choices and greater efficiency.
I want to make three points today.
First, if we are to make better use of the system as a whole, distribution networks will need to play a more active coordination role, not only in operating their own assets, but in helping the broader system work more efficiently.
Second, the question is not competition versus regulation, but whether a service is best provided through a contestable market or through regulated monopoly provision, based on evidence, risks and consumer outcomes.
Third, the tools of network regulation must work together as a system, with reforms designed as connected changes rather than isolated fixes.
Making better use of the system as a whole
At the past two ENA seminars, I have spoken about getting more from the networks we already have: use more before we build more.
That principle remains vital.
Better use of existing capacity can make every dollar invested in the network work harder. It can avoid or defer expensive upgrades and help connect new generation and load sooner.
But it is not simply about using the existing network more. It is also about using it more intelligently.
A practical example is emerging through more widespread adoption of flexible connections.
Under these arrangements, a flexible connection can have import or export management applied through its connection agreement. In practice, that may mean a customer agreeing to be connected to, and at times controlled by, the network’s systems.
CitiPower and Powercor’s proposed flexible network tariffs would apply from 1 July 2026 to eligible generation connections, community batteries, battery energy storage systems and related applications. Customers would be automatically assigned to a flexible tariff where they meet the criteria, but could opt out to the default network tariff.
The tariff structure is designed to reflect when flexible use of the network helps manage constraints. For smaller flexible connections, for example, the proposal includes peak import charges and peak export credits during summer and winter evening peaks, an export charge in daytime periods, and no off-peak energy charge.
For this discussion, the important point is what the design signals about the changing role of distribution networks.
Networks are moving beyond a simple connection decision or a static charge for network use. They are beginning to define when capacity is available, when flexibility has value, and how customers can be rewarded or charged for the way they use the network. This is active system operation in practice.
As these arrangements develop, networks may increasingly be called upon to coordinate rooftop solar, batteries, electric vehicles, flexible industrial demand and other connected resources.
Coordination between transmission and distribution will also need to deepen. The growing volume of consumer energy resources connected to distribution networks increasingly affects the operation of the wider system. Visibility of those resources is becoming an input to transmission planning and operation. Decisions made at the distribution level about flexibility and constraint management have consequences at the transmission interface and vice versa.
The same coordination challenge is emerging from the demand side. Large new loads, including data centres, are seeking connection at scale. In some parts of the system, that is bringing questions about how shared network capacity is assessed, how existing contractual rights are understood, and how transmission and distribution planning decisions interact.
These issues are becoming more important as demand growth returns after a long period in which demand was flat or falling. Responding to these issues will require clearer information, earlier coordination and regulatory arrangements that support efficient use of capacity while protecting consumers’ long-term interests.
This points to a broader shift in what matters economically, to those connecting their assets to the distribution network.
In a more decentralised system, access to information, visibility and the ability to act is as important as access to physical infrastructure.
Networks need to see how consumer energy resources are operating and where local constraints are emerging, while customers and service providers need the information and opportunity to respond, whether through operational decisions or future investment.
Knowing where the network is constrained, when capacity is available and what service is needed can determine whether a customer or third party can offer a solution at all.
Coordination perhaps should be a service in its own right. Networks increasingly need to manage the interaction between millions of devices, customers and market participants, while transporting electricity from one place to another.
In performing these functions, they provide the shared infrastructure, data and access arrangements that allow others, including retailers, aggregators, flexibility providers, EV charging operators and other service providers, to connect with customers and trade or manage energy services.
This places more weight on familiar regulatory questions: whether access is transparent, efficient and non-discriminatory; whether the right information is available to the parties that need it; and whether monopoly network functions are supporting the development of new markets for flexibility, network support and other services that can reduce whole-of-system costs.
That also means providing clarity about what belongs to network regulation, what belongs to the regulation of customer-facing services and consumer protections, and where boundary questions, such as aspects of EV charging infrastructure, need to be worked through carefully.
The framework must identify what information matters, who holds it and who needs access to it. It must support the most efficient mix of network, market and consumer-led solutions. And it must ensure the resulting costs and benefits are shared fairly, across locations and between consumers.
Consumers should understand the terms on which flexibility is offered. Charges and payments should reflect the services being provided. And flexibility should reduce whole-of-system costs, rather than simply shifting risk or complexity onto customers.
So, the question is no longer ‘how much infrastructure does a network need to build?’.
It is ‘what combination of infrastructure, information, incentives and services can meet the system’s needs at the lowest overall cost?’.
Evolution, not reinvention
In July, the AER published an information paper on the future of electricity network regulation. We asked whether the regulatory framework remains suited to the system now taking shape.
Network regulation has evolved before, from centralised supply, through market formation, to increasingly sophisticated incentive-based regulation. And it must evolve again as generation becomes more decentralised, as consumer participation changes – including orchestration – and digital capability changes how the system is used.
The purpose for economic regulation remains enduring.
We regulate electricity networks to promote efficient investment in, and efficient operation and use of, electricity services for the long-term interests of consumers.
That means shaping network decisions and behaviour to deliver value for consumers now and in the future.
It also means giving networks a reasonable opportunity to recover the efficient costs of providing safe, reliable services that meet consumers’ evolving needs.
What is changing is how those enduring principles should apply to new functions, technologies and services.
A broader question is how we assess the respective merits of competition and regulation as new network services emerge.
The answer should not turn solely on whether an asset or activity carries a conventional label such as “regulated” or “contestable”. We need to examine the function being performed, the benefits it could deliver, the risks it creates, and which model is most likely to produce an efficient outcome for consumers.
In some cases, competition will deliver the best result. In others, network scale, integration or access to essential infrastructure may create efficiencies that are difficult to achieve another way. In some cases, we don’t yet know what the right mix of approaches may be.
This becomes more complex when an asset can provide both a network service and a market service. Battery storage can support the network to operate efficiently at a lower cost, while also participating in the wholesale market. How do we define what part of the asset or its value can be considered a distribution service?
Where the answer is uncertain, carefully designed trials can help us build the evidence.
Ausgrid’s Community Power Network trial is one example.
The trial will test whether coordinating rooftop solar and community-scale batteries in parts of Sydney and the Central Coast can make better use of the local network, defer future investment and deliver benefits to consumers.
Network-led orchestration or coordination was one of our key trial ‘buckets’ under our policy-led sandboxing initiative.
The AER granted a time-limited waiver with some key safeguards, including that Ausgrid must publicly share the learnings and outcomes of the trial and provide information that gives competitive providers an opportunity to develop alternative solutions.
The waiver does not endorse a network-led model more broadly. It provides a controlled way to gather evidence about the services and outcomes the trial can deliver, while managing risks to consumers and competition.
Efficient investment, fair access, transparent cost allocation and competition where effective remain essential. The task is to apply those disciplines coherently to technologies and services that increasingly perform more than one role.
One framework, not a series of isolated fixes
These emerging network functions are now being examined through several reform processes.
The AEMC is considering the future scope of regulated electricity network services and the ring-fencing framework, alongside rule-change proposals from DCCEEW, Energy Networks Australia and Nexa Advisory.
Alongside the AEMC’s review, we are reviewing our Distribution Ring-fencing Guideline, including the effectiveness of functional separation, and the Shared Asset Guideline and we are testing emerging models through trial waivers.
DCCEEW, through the CER taskforce is also developing the initial policy design for distribution system operation expectations, rights and obligations.
Our draft Rate of Return Instrument has also attracted close attention, as it should. And the Independent Panel has challenged aspects of our analysis.
We are considering its report carefully, alongside stakeholder submissions and all relevant evidence, before making the final Instrument in December.
Rate of return is not separate from the broader reform conversation. It raises the same fundamental questions about investment, uncertainty and risk.
How should risk be shared between consumers and network businesses? How should the framework respond when conditions change? And how do we support efficient investment without asking consumers to pay more than is necessary?
Those questions will come into sharper focus as the AEMC’s Electricity Network Regulation Review considers the reset process, the mix of incentives and the allocation of risk.
These reform processes have different mandates, but they return to the same issues: efficient investment, appropriate risk allocation, fair access and the role of competition in delivering efficient outcomes for consumers.
They must therefore be considered together.
Now, if this were a Mission: Impossible film, there would be one device to disarm with just one wire to cut.
Unfortunately, regulation is less obliging:
Change service classification - and the implications may flow through to ring-fencing, cost allocation, access and incentives.
Change investment settings - and businesses may make different choices about whether to build infrastructure or procure a service.
The regulatory framework is itself a system. That is why reform must be coherent.
Otherwise, we risk solving one problem and inadvertently creating several new ones.
The AEMC’s Electricity Network Regulation Review provides a valuable forum in which to work through these connections.
The AER supports the review. And our submission does not argue for a wholesale rewrite of that framework, but a careful assessment of whether the existing tools are still doing the job we need them to do.
That systems view has practical consequences.
The framework must be able to respond as new services emerge, with implications for the significant co-ordination role that distribution networks will play.
The five-year determination process provides stability, transparency and scrutiny. But emerging needs will not always wait for the next reset.
There may therefore be value in carefully designed flexibility within a regulatory period. But it must come with clear guardrails.
It cannot become a way to bypass expenditure scrutiny, consumer engagement, service-classification decisions or competition safeguards.
Access is also becoming more important.
New services may depend on network-controlled data, land, poles, connection points or constrained capacity.
Without fair and transparent access to those inputs, other providers may be unable to compete or innovate, and consumers may miss out on cheaper or better solutions.
This is not only a competition issue. It is an efficiency issue.
The framework must also deal more effectively with coordination functions and shared assets.
As networks manage operating envelopes, flexible demand, connection sequencing, data and access to constrained capacity, we must look beyond how much they spend.
We must also ask how those functions are performed, how neutral they are, who can participate and how is the value they create shared.
The same applies when consumer-funded assets or capabilities are used to provide services beyond standard control services.
Cost allocation is important, but it may not tell us whether consumers are receiving a fair share of the resulting value.
Applying this approach
Applying this approach to the rule-change proposals before the AEMC means that the AER does not support either the ENA or Nexa proposal in full.
But our position is more nuanced than a simple yes or no.
Both proposals raise legitimate questions about the boundary between regulated networks and competitive markets.
ENA’s proposal asks whether network scale, land, poles, workforce and systems could help deliver electric vehicle charging infrastructure more efficiently.
That is a question worth asking. But the answer should not be assumed in advance. It depends on context, alternatives, costs, risks and safeguards.
The circumstances in a dense metropolitan area may be very different from those in a regional community where deployment is difficult or the market is unlikely to move quickly.
This does not mean the AER is closed to network involvement in public EV charging or other emerging services.
In some circumstances, network participation alongside other providers may deliver the most efficient outcome for consumers. The regulatory framework should determine the appropriate scope of that role, protect competition and ensure costs are recovered from the parties that benefit, not assume the answer in advance.
Equally, we do not think the test should be narrowed to whether a conventional market failure can be established.
Market failure may be relevant but we should remember that the potential sources of market failure are far broader than just the existence of market power.
The review will also need to consider services and assets that perform more than one role.
A battery may help manage a local network constraint, store a customer’s rooftop solar and provide services to the broader market. Electric vehicle charging infrastructure may support a network need while also providing a market-facing service.
The framework should not be forced to treat the entire asset as either regulated or contestable when the economic reality is that several different services are being provided.
The framework must support competition where it maximises efficiency, while allowing a defined network role where that creates additional whole-of-system value.
The assessment should begin with the outcome required.
What consumer or system problem are we trying to solve? What options are available? Who is best placed to provide the service? Where should the costs and risks sit? And what safeguards are necessary to ensure the benefits reach consumers?
Consumers should not be asked to fund emerging services simply because a network can provide them.
They should fund them where the evidence shows that doing so delivers a better outcome than the alternatives, and where the risks and benefits are allocated fairly.
What we need from network businesses
For network businesses, then, your mission - should you choose to accept it - is not simply to propose a new role, technology or service.
It is to demonstrate why that proposal will produce a better outcome for consumers.
The case must be made in terms broader than the benefit to the network business itself.
The strongest proposals will begin with the consumer or system problem they are seeking to solve.
They will explain why existing arrangements are not producing an efficient outcome and identify the alternatives considered, including third-party and non-network options.
They will describe the whole-of-system benefits, not only the operational benefits to the network. And they will be clear about who pays, who carries the risk and who receives the value.
Where network scale or integration creates an advantage, quantify it.
Where a network controls data, land, poles, connection points or other essential inputs, explain how access will be made available on fair and transparent terms.
Where a trial is proposed, be clear about what is being tested, the evidence that will be collected and what follows. Share emerging insights publicly - not only the final results - so the whole sector can learn from practical barriers, for example, the coordination with councils needed to deliver EV charging.
Most importantly, engage consumers and potential service providers early.
Good engagement is not a final-stage exercise in explaining a preferred solution. It should influence how the problem is defined, which options are considered and how success will be measured.
Networks also have an important role in making the value of flexibility visible.
We need stronger evidence about where flexible demand can avoid or defer expenditure; where hosting capacity can be unlocked; how dynamic connections are performing; and which changes to connection processes materially improve time and cost.
That evidence will help regulators distinguish between innovation that creates new value and activity that merely transfers cost, risk or competitive advantage.
It will also help policymakers develop reforms that are targeted, proportionate and durable.
The questions ahead
The AER will shortly publish its strategic plan for 2026 to 2030.
It is organised around three desired outcomes: energy is more affordable; the lights stay on; and the energy transition progresses.
These are not three separate scorecards.
In many cases they will reinforce one another. In others, decisions will involve genuine tensions between immediate costs, longer-term investment, reliability and the pace of change.
Our responsibility is to identify those tensions clearly, weigh the evidence and explain how our decisions promote consumers’ long-term interests.
AER decision making will be focused on a number of key strategic objectives to help achieve those three outcomes.
Driving more efficient utilisation of electricity distribution networks is one of our key strategic objectives along with considering the merits of both competition and regulation when determining the scope of distribution services. To support this, the regulatory architecture will need to continue to evolve.
We should not design that architecture in the abstract.
We should first define the problems, test them against the evidence and determine which can be addressed using existing tools, and which require more fundamental reform.
That is the next stage of the AER’s work and how we will contribute to the AEMC’s exciting review.
Thank you.