The Australian Energy Market Commission (AEMC) will initiate a review to examine the future of electricity network regulation in the NEM. The review will be initiated in 2026 and will consider the important role of electricity network regulation in providing consumers with a low cost, reliable supply of electricity as the NEM transitions to a net-zero system.

Network costs make up the largest component of power bills so ensuring the regulatory framework remains fit for purpose is critical to achieving outcomes in the long term interest for consumers.  

The review will consider the risk-reward package faced by network service providers (NSPs) in the provision of regulated network services and assess where targeted reform is necessary to ensure the regulatory framework remains fit for purpose into the future. The Commission’s starting position is that the core of the economic regulatory framework – the ex-ante incentive-based regulatory framework – is largely sound. Our initial position is that we should seek to evolve this approach rather than revolutionise it, but note that this does not rule out material changes within the framework.

• How the regulatory framework remunerates NSPs for their efficient costs, including through:  
  • the operating expenditure and capital expenditure components of the building block model  
  • the overall incentives of the ex ante framework as well as explicit incentive mechanisms   
  • the way the rate of return instrument (the RORI) is set and applied.  
• The obligations and minimum service standards that apply to NSPs’ provision of network services and system operations.  
• The regulatory arrangements that determine how regulated services are separated from contestable services, with flow on implications for the AER’s role in service classification and ring-fencing.  
• The role of NSPs in facilitating local generation sources from behind consumer meters or directly connected. 

The obligations and minimum service standards that apply to NSPs’ provision of network services and system operations.  

The regulatory arrangements that determine how regulated services are separated from contestable services, with flow on implications for the AER’s role in service classification and ring-fencing.  

The role of NSPs in facilitating local generation sources from behind consumer meters or directly connected.

The Commission is committed to scoping the Review in an open, collaborative, and transparent manner. During this scoping phase, we will bilaterally engage with stakeholders and host a public forum. During the delivery of the Review, we will rely on our standard consultation processes, make use of existing AEMC forums plus establishing Stakeholder Reference Groups to seek ongoing input from a range of interested stakeholders. Our proposed timeframes for the Review are set out below.