Power of choice

Substantial reforms to the National Electricity Market (NEM) are underway following recommendations to the state and federal governments by the AEMC’s Power of Choice review – giving consumers options in the way they use electricity.

The package of reforms will support the electricity market in meeting consumer needs over the next 15-20 years.

It provides more opportunities for consumers to make informed choices about the way they use electricity based on the benefits that end use services provide. Ultimately, consumers will be in the best position to decide what works for them.

The AEMC’s recommendations include measures to:

  • Reform distribution network pricing principles to improve consumer understanding of cost reflective network tariffs and give people more opportunity to be rewarded for changing their consumption patterns.

  • Expand competition in metering and related services to all consumers, putting greater discipline on competitive metering suppliers to provide services at efficient cost and consistent with consumer preferences.

  • Clarify existing provisions regarding the ability of the market operator, AEMO, to collect information on demand side participation to make its market operational functions more efficient.

  • Give consumers better access to their electricity consumption data.

  • Establish a framework for open access and common communication standards to support contestability in demand side participation end user services enabled by smart meters. This will support consumer choice.

  • Introduce a new category of market participant for non-energy services in the National Electricity Rules to facilitate the entry of innovative products for consumers.

  • Reform the application of the current demand management and embedded generation connection incentive scheme to provide an appropriate incentive scheme to provide an appropriate incentive for distribution businesses to pursue demand side participation projects which deliver a net cost saving to consumers.

  • Establish a new demand response mechanism in the wholesale market - option for demand side resources to participate in the wholesale market for electricity.

The Power of Choice review was presented to the ministers of the COAG Energy Council (formerly SCER) for their consideration in November 2012. Further information about the review is available here.

The AEMC has received a number of rule change requests from the COAG Energy Council and other parties in response to these recommendations. We will consider these proposals in line with the statutory consultation process and will be seeking stakeholder submissions and participation.

The table below indicates the status of the various rule changes and reviews that the AEMC is currently considering.

Rule change requests Status
Distribution network pricing arrangements Final determination published 27 November 2014.
Expanding competition in metering and related services Final determination published 26 November 2015.
Customer access to information about their electricity consumption Final determination published 6 November 2014.
Improving demand side participation information provided to AEMO by registered participants Final determination published 26 March 2015.
Reform of the demand management and embedded generation connection incentive scheme Final determination published 30 August 2015.
Demand response mechanism – option for demand side resources to participate in the wholesale electricity market Consultation paper published 5 November 2015.
Multiple trading relationships Final determination published 25 February 2016.
Embedded networks Final determination published 17 December 2015.
Updating the electricity B2B framework

Consultation paper published on 17 December 2015.

Reviews and Advice Status
Electricity customer switching Published 10 April 2014.
Framework for open access and common communication standards for smart meters

Final advice published 10 April 2014.

Implementation advice on the shared market protocol Final advice published 8 October 2015.

 

Distribution network pricing arrangements

The AEMC received rule change requests from IPART and the COAG Energy Council that proposed changes to the way distribution network prices are developed and structured.

The rule change request from the COAG Energy Council responded to recommendations made in the Power of Choice review to provide efficient and flexible pricing options to consumers to help them make informed consumption choices and manage their expenditure. Due to a significant overlap of issues, the two rule change requests were consolidated and considered together.

A final determination was published on 27 November 2014. Further information about the rule change request is available here.

Reform of the Demand Management and Embedded Generation Connection Incentive Scheme

The AEMC received rule change requests from the COAG Energy Council and the Total Environment Centre regarding reform of the existing demand management and embedded generation connection incentive scheme in the National Electricity Rules.

The objective of these rule change requests was to provide an appropriate return to distribution network service providers to incentivise efficient demand management projects, as well as improve clarity and certainty regarding how the scheme will be developed and implemented.

A Final Determination was published on 20 August 2015. Further information about the rule change is available here.

Embedded networks

The AEMC has received a rule change request from AEMO that proposes changes to the NER to:

  • clarify metering and other arrangements for consumers in embedded networks;
  • reduce the barriers to consumer access to competitive offers from market participants.

A Final Determination was published on 17 December 2015. Further information is available here.

Competition in metering and related services

 On 26 November 2015, the AEMC made a final rule that will open up competition in metering services and will give consumers more opportunities to access a wider range of services. 

The final rule was made in response to a rule change request from the Council of Australian Governments’ (COAG) Energy Council. The Commission’s final rule is a more preferable rule, but contains many of the elements of the COAG Energy Council’s rule change request. 

The competitive framework is designed to promote innovation and lead to investment in advanced meters that deliver services valued by consumers at a price they are willing to pay. Improved access to the services enabled by advanced meters will provide consumers with opportunities to better understand and take control of their electricity consumption and the costs associated with their usage decisions.

The new arrangements, which will commence on 1 December 2017, have required changes to the National Electricity Rules (NER) and the National Electricity Retail Rules (NERR).

Further information is available here.

Advice on open access and common communication standards

On 10 April 2014, the AEMC published advice on a framework for open access and common communication standards for advanced meters. The AEMC’s recommendations formed a first step to establishing a competitive market for the services enabled by advanced meters.

Further information is available here.

Implementation advice on the shared market protocol

The AEMC’s advice on open access and common communication standards recommended the adoption of a shared market protocol. A shared market protocol will define a format of communication that can be used between parties accessing the services enabled by advanced meters.

The AEMC published its final advice on the implementation of a shared market protocol on 8 October 2015. Further information is available here.

Updating the electricity B2B framework

The AEMC has receive two rule change requests from the COAG Energy Council and market participants Red Energy and Lumo Energy. The changes aim to update the business to business (B2B) arrangements in the NER to provide for parties using advanced metering services.

These rule change requests have been submitted following the AEMC’s advice on implementing a shared market protocol, which recommended changes to the B2B framework.

The AEMC decided to consolidate these rule change requests as they seek to address similar issues.

A consultation paper on the consolidated rule change requests was published on 17 December 2015. Further information is available here.

Multiple trading relationships

On 25 February, the AEMC decided to not make a rule on the Multiple Trading Relationships (MTR) rule change request. The rule change request follows earlier work by the AEMC as part of the Power of Choice and Electric Vehicles reviews to develop a new framework to better enable customers to set up MTR arrangements.

MTR refers to the ability of a customer to engage with multiple retailers at a premises. Under the current National Electricity Rules, customers can already engage with multiple retailers by establishing a second connection point. The rule change request was intended to make it easier for customers to engage with multiple retailers.

Since the AEMC’s initial work was completed, however, market conditions changed which limited the potential benefits of the proposed framework. These limited potential benefits were not expected to outweigh the significant costs to implement it. Additionally, the current rules were found to better support MTR than initially thought.

Further information is available  here.

Customer access to information about their energy consumption

In October 2013 the COAG Energy Council submitted a rule change request that proposes to make it easier for customers to access their electricity consumption data from their retailer or distributor in an understandable format and in a timely manner. 

This rule change request is expected to improve consumers’ awareness of their patterns of electricity use and enable customers to make more informed choices about electricity products and services.

A final determination was published on 6 November 2014. Further information about the rule change request is available here.

Review of electricity customer switching

On 10 April 2014, the AEMC published a review into electricity consumer switching timeframes. The review made several recommendations to the COAG Energy Council on how the consumer transfer process can be made more timely and accurate.

Further information about the review is available here.

Improving demand side participation information provided to AEMO

The AEMC received a rule change request from the COAG Energy Council that would enable AEMO to obtain better demand side participation information from registered participants for the purpose of its load forecasts under the National Electricity Rules.

Better information on demand side participation, and so better informed load forecasts could lead to more informed investment and operational decisions, which is in the long term interests of consumers.

The AEMC published a final determination on this rule change request on 26 March 2015. Further information is available here.