Market Review: Completed

Overview

On 28 November 2017 the AEMC published a final report on its review of regulatory arrangements for embedded networks. The final report finds that the current regulatory arrangements for embedded networks are no longer fit for purpose, given the growth in the number of embedded networks and businesses providing services in this sector. The Commission made final recommendations that would provide embedded network customers with appropriate levels of access to retail competition and consumer protections.
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On 28 November 2017 the AEMC published a final report on its review of regulatory arrangements for embedded networks.

The final report finds that the current regulatory arrangements for embedded networks are no longer fit for purpose, given the growth in the number of embedded networks and businesses providing services in this sector.  The Commission made final recommendations that would provide embedded network customers with appropriate levels of access to retail competition and consumer protections.

To address the issues that have arisen in relation to accessing retail market competition, consumer protections and monitoring and enforcement regimes the AEMC recommended new regulatory arrangements for legacy and new embedded networks.

Implementing the recommended regulatory framework will require an inter-dependent package of law and rule changes to:

  • improve access to retail market competition for embedded network customers through: new requirements for most legacy, and all new embedded network customers, to be visible in AEMO’s market systems; and establishing standard network charging arrangements
  • elevate new embedded networks into the national regulatory framework by: requiring registration of embedded network service providers; requiring on-sellers to hold a retailer authorisation; and extending the same metering arrangements for standard supply customers to embedded network customers
  • narrow the network service provider and selling exemption frameworks to apply to circumstances where: the costs of registration as an embedded network service provider and retailer authorisation would outweigh the benefits to consumers; and the need for regulatory oversight is low 
  • enhance consumer protections through: improving the AER’s ability to monitor and enforce exemption conditions; making the National Energy Retail Law (NERL) and National Energy Retail Rules (NERR) work for embedded network customers supplied by an authorised retailer; and improving the information provided to consumers entering embedded networks or involved in a conversion of a property to an embedded network.

A report from MinterEllison, Review of regulatory arrangements for embedded networks - implementation of recommendations in Draft Report - is published on this project page to accompany this review. The MinterEllison report provides further detail on how the AEMC's recommended framework can be implemented. 

Next steps

In August 2018 the AEMC started developing detailed advice on how to implement the proposed framework set out in this final report, including the development of a package of law changes and rule changes. For more information, see Updating the regulatory frameworks for embedded networks.

Background

This review is being held under terms of reference from the COAG Energy Council received in December 2016. The request to the AEMC to undertake this review arose out of the Embedded networks rule change, completed in December 2015.

A number of substantial retail market issues were raised during the AEMC’s work on the rule change. Due to the limited scope of the rule change request, the Commission did not have the power to make changes to the NERR. The Commission also considered that further analysis and consultation was required on the retail market issues raised by embedded networks, including potential NERL changes.

In the Final Rule Determination, the AEMC recommended that the COAG Energy Council request the Commission to undertake a review of the NERL and NERR to identify and assess the issues regarding the arrangements for embedded network customers. The Commission also recommended that the COAG Energy Council consider whether this review should consider broader embedded network issues.
 

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