Market Reviews: Completed

The Commission has found that the existing Chapter 6 framework would adequately accommodate the recovery of the efficient costs of mandated smart metering infrastructure, subject to some incremental amendments to the Rules being made. A draft Rule change proposal and draft Rules have been prepared by the Commission to implement its proposed changes to the Rules. View more

On 22 December 2010, the Commission published its Final Report in response to the Ministerial Council on Energy's (MCE's) request for advice on whether Chapter 6 of the National Electricity Rules (Rules) efficiently accommodates cost recovery for smart metering infrastructure mandated by a Ministerial determination.

The Commission has found that the existing Chapter 6 framework would adequately accommodate the recovery of the efficient costs of mandated smart metering infrastructure, subject to some incremental amendments to the Rules being made. A draft Rule change proposal and draft Rules have been prepared by the Commission to implement its proposed changes to the Rules.

The Commission submitted its Final Report and draft Rules to the MCE on 30 November 2010. The Final Report and draft Rules were considered by the MCE at its December 2010 meeting.

Background

On 19 November 2009, the MCE requested the Commission provide advice on whether Chapter 6 of the Rules efficiently accommodates cost recovery for smart metering infrastructure mandated by Ministerial determination, as contemplated under the National Electricity (South Australia) (Smart Meters) Amendment Act 2009 (Smart Meters Act).

Under the Smart Meters Act, Ministers in participating jurisdictions may make a determination to require regulated distribution network service providers (DNSPs) operating predominately in their jurisdiction to:

• roll out smart metering services to customers; and
• conduct trials and pilots of smart metering infrastructure and other related technologies, including direct load control.

Under the MCE's request, the Commission is to provide advice on a number of issues, including but not limited to, whether Chapter 6 of the Rules:

• Provides for the efficient recovery of DNSP costs from smart meter roll outs and pilots;
• Allows the Australian Energy Regulator (AER) to take into account ‘reasonably achievable network benefits' in determining the efficient costs of smart meter roll outs and pilots;
• Allows the AER sufficient flexibility to consider pass through applications by DNSPs for costs associated with smart meter roll outs and pilots;
• Provides appropriate incentives for DNSPs to promptly pass on efficiencies from roll outs to customers, maximise the competitive purchase of metering services and meters, and manage technology risks associated with the roll out of smart metering infrastructure; and
• Requires modification to smooth the tariff impact of a smart meter roll out decision on customers.

The Smart Meters Act will be supported by a transitional Rule, which will facilitate the transition to smart metering under a Ministerial roll out determination. A copy of the Smart Meters Act and the draft transitional Rule is attached to the MCE's request for advice, which can be found below.　　

On 17 December 2009, the Commission published its Draft Statement of Approach to seek comment on its proposed approach to providing the MCE's advice and the issues set out in the MCE's terms of reference. Submissions closed on the Draft Statement of Approach on 5 February 2010. Following consideration of the submissions received on the Draft Statement of Approach, on 10 March 2010, the Commission published its Final Statement of Approach.

On 18 June 2010, the Commission published its Draft Report for public consultation, which set out its draft advice to the MCE on whether Chapter 6 of the Rules most efficiently accommodates cost recovery for smart metering infrastructure mandated by a Ministerial determination. Submissions closed on the Commission's Draft Report on 23 July 2010. After considering submissions on the Draft Report, the Commission considered that further time was required to assess a number of complex issues that were raised by stakeholders.

On 9 August 2010, the Commission wrote to the Chair of the MCE Standing of Committee of Officials (SCO) to seek an extension of time from 31 August 2010 to 17 September 2010 to submit its final advice and proposed draft Rules to the MCE. This request was approved by the Chair of the MCE SCO on 20 August 2010.

On 15 October 2010, the Commission received a letter from the MCE, requesting that the Commission consider an updated cost benefit study of the Victorian smart meter roll-out prior to finalising its Final Report. This updated cost benefit study was released on 3 September 2010 by the Victorian Government. To allow the Commission to consider this study, the MCE provided an extension of time for the submission of the Commission's Final Report to 29 November 2010.

A copy of the Victorian Government's updated cost benefit for its smart meter roll-out can be accessed here:

http://www.new.dpi.vic.gov.au/smart-meters/program-background/victorian-ami-program

Timetable for Providing Advice

The Commission was requested to provide its final advice to the MCE by 29 November 2010. The Commission's timetable for providing its advice to the MCE is outlined below.