Market Reviews: Open

We invite submissions on this Draft Report by 23 July 2010. Following consideration of these submissions, the Commission will publish its Final Report by 31 August 2010. View more

On 18 June 2010, the Commission published its Draft Report for public consulation, which sets out its draft advice to the Ministerial Council on Energy (MCE) on whether Chapter 6 of the National Electricity Rules (Rules) most efficiently accomodates cost recovery for smart metering infrastructure mandated by a Ministerial determination.

Overall, our assessment finds that the existing processes for cost recovery are adequate and have the potential to accomodate the recovery of the efficient costs of smart metering infrastructure mandated by a Ministerial determination. Therefore, no fundamental changes to the Rules are required to support the MCE's policy on smart meters. However, some incremental amendments to the Rules are recommended to better accommodate the nature of expenditure relating to smart metering infrastructure in this context.

We invite submissions on this Draft Report by 23 July 2010. Following consideration of these submissions, the Commission will publish its Final Report by 31 August 2010.

To support the Commission's draft advice, the Commission has also published the following documents:

• Legal advice provided by Allens Arthur Robinson; and
• An options paper and spreadsheet, which set out further detail on the alternative cost recovery mechanisms that were considered in the Commission's draft advice.

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.

Timetable for Providing Advice

Under the MCE's request for advice, the Commission is to provide its final advice to the MCE by 31 August 2010. Outlined below is the Commission's timetable for providing its advice to the MCE.