The Australian Energy Market Commission (AEMC) has proposed making two new rules that facilitate lower costs to consumers as well as faster delivery of critical transmission infrastructure needed for the energy transformation.
The draft rules and associated draft determinations are out for stakeholder consultation today following two rule change requests from the Commonwealth Minister for Climate Change and Energy, Chris Bowen, and a rule change request from Energy Networks Australia (ENA).
The AEMC sets the rules for the National Electricity Market (NEM) and provides independent expert energy advice to Australia’s State and Federal Governments. It is strongly focused on ensuring the regulatory framework strikes the right balance between getting transmission built quickly and affordable electricity prices, particularly in light of current cost of living concerns.
An essential part of this work involves improving financing arrangements for the delivery of new transmission and distribution projects needed for the transformation, in order to drive timely delivery at the lowest possible cost for consumers.
Sharing concessional finance benefits with consumers (‘concessional finance’)
The AEMC today made a draft rule change on concessional finance that would allow the benefits of financing for transmission and distribution projects sourced through government programs, such as the Commonwealth Government’s Rewiring the Nation Fund, to be passed back to consumers in the form of lower network charges, either now or in the future.
The Commonwealth Government’s Rewiring the Nation Fund commits 20 billion dollars to modernise our electricity grid and infrastructure. This low cost finance is intended to support efficient investment in, and timely delivery of, critical transmission infrastructure, while minimising network charges to consumers.
Currently, there is no mechanism by which the benefits of concessional finance can be shared with consumers. AEMC Chair Anna Collyer says that under our proposed rule, the benefits of government funding could now be shared between the network business and consumers.
“It is in everyone’s best interests – from consumers to network service providers to governments, to have clarity and transparency around concessional financing, to support the sector in the build out of major transmission projects,” she said.
Accommodating financeability in the regulatory framework (‘financeability)
Our second draft rule change on financeability’ seeks to address the challenges network service providers may have in securing efficient funding for major projects, in accordance with the needs of the transition.
Should a final rule be made, the National Electricity Rules would be amended to improve the ability of transmission network service providers (TNSP's) to efficiently finance the timely delivery of major projects.
The change would empower the Australian Energy Regulator to modify the timing of depreciation to manage cash flows when required. This would deliver benefits to consumers in the short and long-term, without providing additional revenue to TNSPs in real terms over the life of the assets.
It would also facilitate timely investment in transmission that the Integrated System Plan (ISP) has determined as necessary to support emissions reduction, security, and reliability. Delayed investment in transmission would come at a cost to consumers.
AEMC Chair Anna Collyer said both proposed changes should provide investors and consumers with confidence.
“When it comes to transmission, it is critical we strike a balance between getting the right investment to achieve net zero and facilitating a reliable and secure future energy system, with delivering major projects at the right time and as cost-effectively as possible to ensure the best outcomes for consumers,” she said.
“Our rule, if it were to be made, should provide transmission businesses and investors with greater certainty to develop projects in a timely way, so that the system can keep up with the pace of the transition and customers can enjoy reliable and secure power at the lowest possible price,” she said.
A public forum will be held from 11am on 15 December 2023 to present the draft determinations and to provide an opportunity for stakeholders to ask questions and provide views. The public forum will be held jointly for the rule changes on Accommodating financeability in the regulatory framework and Sharing concessional finance benefits with consumers.
Submissions to both draft rule changes close on 8 February 2024.
For more information about the financing arrangements proposed, or to provide feedback, visit the project pages:
Media: Jessica Rich 0459 918 964 or firstname.lastname@example.org