The Australian Energy Regulator (AER) has published further guidance on the interaction between its ring-fencing provisions and our recently published final report on distributor-led stand-alone power systems (SAPS).

The AEMC’s recent report published on 28 May supports energy distribution businesses taking advantage of improved technologies to choose stand-alone power systems when it is cheaper than using poles and wires to supply their customers via the grid.

Under the AEMC’s recommended framework, the AER’s ring fending provisions would still apply – meaning that distribution businesses must source generation services from a third party unless they get a waiver or are exempted. The provisions are designed to benefit customers through competition that lowers prices, encourages innovative new products and long-term efficiencies and prevent cross subsidies to distribution businesses. 

Energy distribution businesses might choose to apply for a ring-fencing waiver that allows them to provide both generation and distribution services to customers for a range of reasons. These could include servicing customers in remote areas where there are limited or no providers of generation systems.

The AER’s updated guidance acknowledged concerns raised by some distributors about the process of obtaining ring-fencing waivers, saying the Regulator has given some preliminary thought to how the process might be simplified. Options could include:

  • applying waivers to categories of stand-alone power generation systems such as ‘single small customer connections in remote locations’
  • exempting SAPS below a certain threshold from the ring fencing rules e.g. below a certain size, remoteness or some other metric
  • allowing distributors to provide generation services up to a certain revenue threshold.

The AER will consult on the approaches to ring fencing waivers in parallel to its review of the Electricity Distribution Ring-fencing Guideline, which it expects to complete during 2020.

Media: Kellie Bisset, Media and Content Manager 0438 490041