Promoting efficient reliability investment in transmission networks

01 November 2013

Review of the national framework for transmission reliability – Final Report

The Australian Energy Market Commission today recommended that the Standing Council on Energy and Resources (SCER) adopt a new approach to setting reliability levels for transmission networks in the National Electricity Market. The AEMC’s approach aims to promote more efficient investment by network businesses and provide for reliability levels which reflect what customers are willing to pay for.

Electricity transmission services are provided by monopoly companies. The regulation of reliability standards for transmission businesses is needed to protect customers from the risk of network businesses reducing reliability levels in order to increase profits.

The level of reliability that transmission networks are required to provide is currently set by jurisdictions and directly impacts the electricity prices paid by households and businesses.

AEMC Chairman John Pierce said transmission networks play a key role in not only transporting power from generators to major demand centres across the nation, but also in maintaining the safe and secure operation of the power system.

“The AEMC’s recommended approach requires transmission networks to provide a level of reliability which is in line with community expectations.

“Our approach would provide greater transparency in how reliability levels are set and require the views of customers to be explicitly taken into account.

“This would enable governments to make more informed decisions on how the balance the trade-off between the costs of network investment and reliability outcomes for customers,”Mr Pierce said.

“Generators and businesses would also have more information and certainty about the level of reliability they can expect to receive in different parts of the National Electricity Market, which would help them to make more efficient decisions about where to locate their operations.

“Greater transparency and certainty on expected reliability levels would also enable transmission businesses to be held accountable for the level of reliability that they provide in practice.

“Over the longer term this should lead to more efficient investment by transmission businesses and other market participants, which would flow through to more efficient prices for customers.

“Now is a good time to consider such reforms given slowing electricity demand growth and the reduced need for network investment. This environment provides us with an opportunity to introduce a new national framework under relatively stable network conditions,” Mr Pierce said.

There is also an opportunity to capture some of the benefits in the near term through establishing key tools to apply to existing jurisdictional arrangements ahead of the full implementation of the national framework. The AEMC has set out a plan to support the implementation of our recommendations for SCER to consider.

For information, contact:

AEMC Chairman, John Pierce(02) 8296 7800

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817

1 November 2013