Level 2, 172 Flinders St 
Melbourne  VIC  3000
Phone: 03 9639 7600 
Fax: 03 9639 8966
ACN 100 188 752

9 May 2006

Mr Sebastian Roberts
General Manager
Australian Energy Regulator

By email: aerinquiry@aer.gov.au

Dear Mr Roberts
Thank you for the opportunity to make a late contribution to the Australian Energy Regulator’s (AER) Gas and Electricity Distribution Regulatory Guidelines Scoping Paper.  
The Consumer Utilities Advocacy Centre Ltd (CUAC) is an independent advocacy organisation, established to represent the interests of Victorian consumers, particularly low-income, disadvantaged, rural and regional and Indigenous consumers, in policy and regulatory decisions on electricity, gas and water.  This submission has been made with the interests of those consumers firmly in mind.   The views expressed in this submission are also supported by the Consumer Law Centre Victoria. 
CUAC generally endorses the AER’s approach to the development of gas and electricity distribution regulatory guidelines.  Following are some comments on the issues on which the AER has sought specific feedback.
CUAC agrees that electricity distribution guidelines should be developed separately from the development of guidelines for gas.  As the AER notes in the paper, there are important differences in the regulatory approaches to each fuel, and a lack of clarity as to the structure of the regulatory framework for gas.  It is also worth noting that there are significant consumer concerns pertaining to electricity distribution and, particularly, the service problems experienced by rural communities in securing reliable and affordable access to electricity – often the only fuel they are able to use – which also warrant specific consideration by the regulator in developing electricity distribution guidelines.  
It has become increasingly evident in Victoria that a key issue for regional townships and small remote communities has been their difficulty in securing improvements to their energy supply.  These communities tend to share the following characteristics: small populations, with few and/or small industrial users; poor distribution networks; and a lack of resources to address the complexity of negotiating network augmentation with a distributor. 
Poor energy supply in these communities places real and immediate constraints on their capacity to expand local business or attract new investment.  In Victoria, the increasing price of LPG has also meant that residential consumers in communities without reticulated gas (who are unlikely to have the load to make such connection feasible) are increasingly dependent on electricity and thus more vulnerable to price, reliability and quality of supply problems.   
In Victoria consumers also face a number of problems in securing network augmentation including: information asymmetries, lack of bargaining power, lack of access to effective dispute resolution, and the configuration of consumer protections and rights on the basis of an individual consumer, rather than being able to present the interests of the community as a whole.  These problems have resulted in instances where business consumers are effectively subsidising a community’s supply, either in upgrading significant portions of the network or in being forced to install expensive solutions to ameliorate their usage on a poor line. 
CUAC generally endorses the AER’s approach to the separate development of guidelines for electricity distribution and transmission, given there remains significant uncertainty on key elements of the economic regulatory framework for transmission and distribution.  
CUAC also supports the proposed process and timeframes for the development of electricity distribution guidelines.  
We particularly welcome the AER’s commitment to substantive engagement with stakeholders – pricing and pricing principles will clearly be an issue for detailed discussion, as will be the issues of service outlined above.   We note that a key element in engaging consumers will be to ensure that consumers and communities are able to access relevant and up to date information about their supply.  As we have stated previously, a key tenet of effective regulation of monopoly businesses is the notion that competition by comparison acts as a further incentive to improve performance.  To enable competition by comparison of performance standards, network constraints and the economic, social and environmental outcomes that enable governments to make informed decisions about the networks in their jurisdiction, the AER must be able to report publicly and in a standardised format.  Transparency and public reporting also contributes to informed consumer advocacy, which again leads to informed and improved decision-making by the regulators.  
Should you have any questions about the above, please contact me on 03 9639 7600.  
Yours sincerely
Kerry Connors
Executive Officer